Landlord and tenant — Rent review clause — Whether certain notices given by landlords were valid and effective for the purpose of setting the rent review machinery in motion — Also question whether lease of adjacent premises between the same parties framed by reference to the original lease incorporated the rent review clause — Held as a matter of construction of the second lease that the rent review clause was not incorporated — The main question, which arose on the first lease, was whether, although time was not of the essence of the clause, a notice given more than six years after the date provided in the clause for giving notice was effective — Held that a delay of more than six years was unreasonable and that the review machinery could not be invoked after such a lapse of time — United Scientific Holdings Ltd v Burnley Borough Council cited — James v Heim Gallery (London) Ltd distinguished
This was an
originating summons by which the plaintiffs, Telegraph Properties (Securities)
Ltd, sought a declaration that certain notices were effective to operate a rent
review clause. The plaintiffs were the successors in title of the original
lessors and the defendants, Courtaulds Ltd, were the successors of the original
lessees. The properties which were the subject of the present proceedings were
portions of Lansen House, Gladstone Street, Darlington, and adjacent premises.
D M W Barnes
(instructed by Radcliffes & Co) appeared on behalf of the plaintiffs; N B
Primost (instructed by S B Gilinsky & Co) represented the defendants.
Giving
judgment, FOSTER J said: By this originating summons the plaintiffs seek a
declaration that certain notices given to the defendants constitute a valid and
effective notice for the purpose of putting into effect a rent review clause
and a declaration that the plaintiffs are entitled to have the rents payable in
respect of the last seven years of two leases reviewed.
The
conveyancing history. By a lease dated February 2
1966 made between A G Goldsworth and Co Ltd, the lessor, and Goldsworthy
Textiles Ltd, the lessee, the lessor demised to the lessee the ground floor,
mezzanine and first floor of a property, Lansen House, Gladstone Street,
Darlington, for a period of 14 years from January 1 1966 for the yearly rent of
£2,000. By clause 5 of that lease it was provided as follows:
If either
party so desire at the end of the first 7 years to apply for a revision of the
rent and shall give 3 months notice in writing of such desire then such rent
shall be revised in accordance with the rents prevailing for similar premises
in the same area excluding any goodwill which shall have become attached to the
demised premises by reason of the carrying on thereat of the business of the
lessee and excluding any effect on rent of any improvements carried out by the
lessee and in the event of the parties failing to agree then the matter should
be referred to a single arbitrator to be approved by the lessor and lessee
under the provisions of the Arbitration Act 1950 or any statutory modification
or re-enactment for the time being in force.
The first
seven years ended on January 1 1973 and three months before that was October 1
1972, so that any notice should be given previously to that date.
On March 28
1967 a deed of surrender and of variation was entered into between the same
parties. By that deed the lessee surrendered to the lessor part of the premises
demised by the lease of February 2 1966 and in consideration of that surrender
the rent was reduced as from March 12 1967 to £1,250. This deed contained a
clause 4 by which the lessee could by a notice given 12 months before the
expiration of the lease require a grant of a further term of seven years at a
rent to be determined in accordance with clause 5 of the lease.
On the same
date, March 28 1967, and made between the same parties, the lessor demised unto
the lessee certain other premises not being the premises surrendered but being
premises adjacent to the original premises leased. The term was from March 12
1967 until December 31 1979 at the rent of £4,300 per annum. I must consider in
much greater detail this lease later in this judgment. It also contained a
provision, clause 4 (iv), for a grant of a further seven years from the
expiration of the lease.
It is common
ground that the plaintiffs are the present lessors of the property and the
defendants are the present lessees. In fact the lessors gave no less than four
notices to try to activate the rent renewal clauses. The first was dated
October 11 1978, when they wrote to the tenant a letter which reads:
This notice
is given in accordance with clause 5 of the lease dated February 2 1966 as
referred to in the lease dated [it has got ‘March 28 1966’ but it ought to have
been ‘1967’] under which you occupy the premises of the above address. We
therefore put forward the figure of £15,000 per annum as the new rental to
become payable from the review date being 1st January 1973.
Then reference
is made to the business rent control. I should have read the first paragraph of
that letter, which is:
As authorised
agents of your immediate landlords in relation to the above property we hereby
give you notice of the landlords’ intention to exercise their right to call for
the review of the rent.
The second
notice was written to Courtaulds Ltd, was dated January 24 1979, and reads as
follows:
We write with
reference to our letter dated 12
it should of
course be 11
October 1978
in which we stated our client’s intention of operating the rent review relating
to the above premises in accordance with clause 5 of your lease dated February
2 1966. For the sake of clarity and completeness we hereby give you notice that
our clients also intend to call for a review of the rent payable relating to
the above premises held by your company under a lease dated March 28 1967,
which refers extensively to the above mentioned lease. The figure of £15,000
per annum mentioned in our letter dated October 12 relates to the whole of the
premises which are let to your company under the above mentioned two leases.
A letter was
sent to Goldsworthy Textiles Ltd in exactly the same terms.
Finally, on
July 27 1979 the solicitors wrote to the receiver, who had then been appointed
for the property, and said this:
Hereby give
you notice that your landlords desire to apply for a revision of the rent
payable in respect of the premises let to you (a) by a lease dated February 2
1966 and (b) a lease dated March 28 1967 made between the same parties. The
said notice is given pursuant to clause 5 of the lease of 1966 and clause 2 of
the lease dated March 28 1967.
Two questions,
in my judgment, arise. The first is: Does the lease of March 28 1967 of the
additional premises contain a clause for a rent review; and, secondly, in any
event can the plaintiff invoke the rent review clause by giving notice some six
years and 10 days after the required date?
The lease
of March 28 1967. I have come to the conclusion
that this lease does not include a clause for a rent review. In the lease of
February 2 1966 the date for a review was, as I have said, January 1 1973 and
the notice had to be given before October 1 1972. Paragraph 2 of the second
lease reads as follows:
Subject as to
the premises demised the terms of years granted, the rent reserved, and the
matters specifically referred to hereafter, this demise is made upon the same
covenants on the part of the lessor and lessee and guarantor respectively and
to the same stipulations and conditions as were
Goldsworth and Company and Goldsworthy Textiles Limited and Bell Nixon of the
third part, as if the same were herein set forth at length with such
modifications only as are necessary to make the same applicable to the present
demise save that it is hereby agreed and declared that sub-clauses (vi),
(viii), and (ix) of clause 2 and sub-clauses (iii) and (iv) of clause 3, and
clause 8 of the said lease of February 2 1966 shall not apply to this demise.
In the opening
the words ‘the rent reserved’ refer in my judgment to the sum of £4,300 and do
not include any additional rent which might be payable if there was a rent
review clause. The opening words ‘subject as to’ exclude in my judgment the term
of years granted, the rent reserved, and matters specifically referred to, from
the terms of the lease of February 2 1966 to be implied. The lease was to run
from March 12 1967 to December 31 1979 and it would have been extraordinary if
there was implied a rent review on January 1 1973, that is some five years nine
months and ten days from its commencement. It was pointed out that clause 5 of
the original lease was not specifically excluded; but the reason for this is
that it is used for the possible extension of the term under paragraph 4(4). It
is also to be noticed that in the original lease of February 2 1966 the lessee
covenanted by a clause 2(i) ‘To pay the rent hereinbefore reserved and to make
the payment by way of additional rent hereinafter provided’. In the lease of
March 28 1967 the lessee covenanted by clause 3(i) ‘To pay the reserved rent at
the times and in the manner aforesaid’. There is no mention of any additional
rent. In my judgment the clause for the rent review is not to be included in
the lease of March 28 1967. That does not, however, mean that I should not deal
with the second question, because whether I am right or wrong on the
construction which I have given to the 1967 deed the question still arises as
to whether the rent review clause is or is not effective.
The defendant
levelled several criticisms of the four notices given: that there should have
been two notices; that the proposed rental should have been put forward for
each of the demised premises; and that in the final notice no figure was
mentioned. In my judgment there is nothing in any of those criticisms.
Delay. Assuming that the first notice was given on October 11 1978, this
amounted to a delay of some six years and 10 days since its due date. Can the
plaintiff succeed after such a delay?
The plaintiff relies on the decision of the House of Lords in United
Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904. The
decision was actually given in March 1977. It had always been thought before
that case that in rent review clauses time was of the essence, so that if the
notice was one day late the landlord could not enforce the provision. There
were two appeals before the House of Lords and in neither was there any undue
delay. Lord Simon, at p 942, says this:
The Court of
Chancery would therefore decree specific performance of the conveyance
notwithstanding that various steps leading to completion had not been observed
timeously, provided that B had been guilty of no such delay as to make it
unreasonable for him to call on A to complete out of time or that it would
otherwise be unfair to A.
At p 951 Lord
Salmon says this:
Nevertheless
any unreasonable delay caused by the landlords and which is to the tenants’
prejudice would prevent the rent being revised after the review date.
In that case
the House of Lords was not dealing with a case where there had been long delay
in serving the notice. In the recent case of James v Heim Gallery
(London) Ltd (1980) 256 EG 819 the notice which had to be given was not
less than six months before June 24 1972, ie before December 24 1971. Notice in
fact was given on June 5 1972, a delay of some five months and ten days, and
before the expiry of the first seven years. In that case the defendants relied
on certain facts which they said amounted to promissory estoppel and the
learned judge found for the defendants on that ground. That decision was
reversed on October 7 1980 and I have a transcript of that which is numbered
80/660 from the Law Library. That decision was based on the fact that the delay
in giving the notice was not great and that the acts relied on by the
defendants were insufficient to raise a plea of promissory estoppel. Again,
that court was not faced with long delay in giving the notice., [1980] 2 EGLR
119
Counsel for the
plaintiff went so far as to say that any such delay would be valid not only
after the expiration of the lease but at any time in the future, a submission
which I find fanciful. In a case such as the present, where the delay is over
six years before the notice itself is given, I do not think that the doctrine
of promissory estoppel has to be considered at all. In my judgment the
plaintiff has been guilty of such a delay as to make it unreasonable for it to
call on the defendant for a rent review and to do so would be of necessity
unfair for the defendant. I also refer to the fact that in the Heim case
the matter was raised some six months after the House of Lords’ decision. But
in this case the matter was not raised for a year and a half. That again seems
to me to be delay to which the court will give heed. I therefore need not go
into the facts in regard to the matters which have been put in evidence as to
the effect both on the plaintiff and the defendant if the notice is not held to
be good.
One further
matter I should deal with is that in the James v Heim Gallery
case no mention whatever is made of the legislation which controlled rents and
that legislation was not repealed until April 1 1976. The plaintiff does not
seek to say that the rent could be increased before that date. Exactly the same
position must have occurred in the James v Heim Gallery case and
I for my part cannot see that the plaintiff gains any comfort from that fact.
It follows that in my judgment I do not propose to make either of the two
declarations for which the plaintiff asks.
The summons
was dismissed with costs.
