Legal Updates

Property: Landlord and Tenant - Rent Review

This Court of Appeal decision concerned a late rent review brought by Lance Crest Limited in the case of Lance Crest Ltd v Asiwaju [2005]. The landlords, Lance Crest Ltd, let a property to, Asiwaju, the defendant by a lease dated February 1997. The Lease was granted for a term of 12 years and the rent was £6,500 per annum and subject to rent review.

Under Clause 5.1 of the Lease, there were provisions for rent review as follows:-

Clause 5.1 of the Lease provided that:-

   1. Rent review from the end of every fourth year of the lease period;
   2. Landlord to give a review notice to the tenant no more than 12 months before the review date in order to exercise the option to review rent; and
   3. The tenant was required to give a counter notice to the landlords within two months after the review notice if the tenant did not accept the annual amount proposed. If the tenant failed to give this notice to the landlord, the new basic rent would apply from the review date.

In August 2001, the claimant acquired the reversion to the Lease. This was some six months after the first rent review date of 5 February 2001. The rent review notice had not been served. On 19 February 2002, the claimant wrote to the defendant giving notice that the annual amount proposed as basic rent from the review date of 5 February 2001 was £30,000 per annum. The defendant replied on 5 March 2002, by a letter headed 'Rent Increase' which stated that the claimant's notice or demand was invalid on the grounds that the terms of the lease required one year's notice of any rent review, and that a valid one-year notice had not been served. The tenant requested arbitration.

 

The claimant argued that under clause 5.1(b) of the Lease, no time limit by which a trigger notice had to be served was stipulated. The defendant maintained his position, and the claimant applied for the appointment of an independent surveyor to determine the rental value of the property. The surveyor reviewed written submissions from the claimant, but the defendant made no submissions. The surveyor decided that the new basic rent would be £28,000 per annum. The claimant issued proceedings against the defendant.

The court had to rule on the following:-

• Whether the claimant had lost the right to a rent review as a consequence of failing to serve a trigger notice on the defendant or before 5 February 2001. If so, the rent would remain at £6,500 per annum.
• Whether the defendant's letter of 5 March 2002, served as a valid counter-notice under clause 5.1(c).

The court held that the trigger notice had been valid, notwithstanding the fact that it had been served late, because time was not of the essence in relation to that date. The court further ruled that the letter was not a valid counter-notice, on the grounds that it constituted a challenge not to the annual amount proposed by the claimant, but to the claimant's right to review the rent. The defendant appealed.

The defendant's appeal was allowed in part.

•  It was an established principle that, in the absence of any contra-indications in the express words of a lease or in the inter-relation of a rent review clause itself and other clauses or in the surrounding circumstances, the presumption was that the timetable specified in a rent review clause for completion of the various steps for determining the rent payable in respect of the period following the review date was not of the essence of the contract.
•  In the instant case, the court had reached the right conclusion in holding that, despite the fact that the trigger notice had been served over a year late, it was still valid because there was no express provision that time was of the essence in relation to the time limit contained in clause 5.1(b) of the Lease.
• The claimant had, therefore, validly implemented the rent review by the letter dated 19 February 2002.
• Brooke LJ dissenting - considered the question whether for a particular document to be a valid notice it had to depend on the contractual provisions under which it was said to be served, and the precise terms of the document and the matrix of facts in which it was received. He ruled that in the case, clause 5.1(c) of the Lease had merely required the defendant to inform the claimant of the fact that he was not accepting the rent. He had in his letter of 5 March 2002, complained about the validity of the notice and had not accepted the amount of the rent. Therefore, the defendant had served a valid counter-notice under clause 5.1(c).

The defendant's appeal was allowed in that respect only. Hence, the rent under the Lease was £28,000 per annum with effect from 5 February 2001.

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© RT COOPERS, 2005. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.