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Time of essence

The leading case

Starmark Enterprises Ltd v CPL Distribution Ltd
[2001] EWCA Civ 1252

The normal presumption in rent review cases that time is not of the essence can be displaced if there is a clear contraindication in the wording of the rent review clause. A deeming provision, which expresses a clear intention as to the consequences of a party's failure to comply with a prescribed timetable, will make time of the essence. In this case the lease stated that if the tenants failed to serve a counter-notice within one month they shall be deemed to have agreed to pay the increased rent specified in the rent notice. (Mecca Leisure Ltd (1984) 49 P&CR 12 not followed.)


Time successfully made of the essence

First Property Growth Partnership LP v Royal & Sun Alliance Property Services Ltd
[2002] EWCA Civ 1687

Facts

The lease required L's trigger notice to be given at any time not more than 12 months before the expiration of each of any of the following years of the said term that is to say every fifth year thereof but not any other time. The lease commenced on 7 May 1975. In April 2001 L purported to serve a notice to take effect as from 7 May 2000.

Held

The time was made of the essence. The notice could only have been served between 7 May 1999 and 6 May 2000. It was therefore invalid.


Implying a time limit

Barclays Bank plc v Savile Estates Ltd
[2002] EWCA Civ 589

Facts

Rent review clause provided that L only could apply to the RICS for determination of rent in default of agreement. There was no express time limit imposed. L therefore objected when T tried to make time of essence.

Held

It was necessary to imply a term imposing a time limit within which the L was to apply i.e. within a reasonable time. Once there was such a time limit T could make time of the essence. The implication was necessary for business efficacy; otherwise T would be left in a state of uncertainty, which would be problematic, if, for example, T wished to assign the lease. As Ls notice was served outside the reasonable period specified by T, when making time of the essence, it was invalid.

But compare Bello v Ideal View below


Presumption not rebutted

Wilderbrook Ltd v Oluwu
[2005] EWCA Civ 1361

The presumption with a rent review clause is that time is not of the essence in respect of the service of a tenants counter-notice. The presumption can be rebutted but only by clear words. Paragraph 13 of the lease was in the following terms:
    "As respects all periods of time referred to in this Schedule time shall be deemed to be of the essence of the contract PROVIDED ALWAYS that the Landlord or the Tenant may notwithstanding anything in this Schedule require the appointment of the Surveyor or any substitute Surveyor to determine the question of new rent payable at any time after the commencement of each relevant period of years and any delay by the Landlord of the Tenant in this respect shall not deprive the Landlord or Tenant of their respective right to have a New Rent determined by the Surveyor as set out herein."
The court considered that the clause was hard to construe but came to the conclusion that time was not of the essence in respect of service of the counter-notice. Pill J:
    "The presumption that time is not of the essence in rent review clauses is well established. It provides the starting point for the analysis of such clauses. It may be rebutted by a clear stipulation in the lease (Kay LJ in Starmark, see also Peter Gibson LJ at page 1033D). To rebut it, however, the "contra-indications", to adopt Lord Diplock's word in Cheapside, must in my view be clear and explicit. The proviso in paragraph 13 is plainly intended to limit the deeming provisions in the Schedule, which would otherwise be clear contra-indications. The effect of its presence and wording is to deprive the contra-indications relied on of the clarity required to rebut the presumption, which accordingly operates."
The tenants counter-notice was served out of time. However, as the presumption that time is not of the essence was not rebutted the rent review could still be challenged.


Long delay - time not of the essence?

Bello v Ideal View
[2009] EWHC 2808 (QB)

Summary

Time was not of the essence in a rent review clause and a rent review 13 years after the rent review date was valid.

Facts

Mr Bello (T) was tenant of a house under the terms of a 50 year lease granted in 1969. The lease provided for an annual rent of £60, payable quarterly in advance, and for a rent review after 25 years in March 1994. T purchased the lease in July 2005, and at that time no rent review had taken place. The freehold was then purchased by the Ideal View (L) in 2006 which, after some initial communication with T, referred the issue of the reviewed rent under the arbitration mechanism built into the rent review clause to the arbitrator. The arbitrator’s award, dated 22 August 2007, set the rent due from 25 March 1994 at £1,700 per annum.

L then commenced proceedings to recover the increased rent back to 1994 and arrears which had fallen due since March 2006. T claimed that the delay in instigating the rent review procedure was a bar to recovery.

Issue

There were two issues before the court:
  • Did s19 of the Limitation Act 1980 prevent L from recovering the sums due?
  • Was time of the essence under the rent review clause?
Decision

On the first issue, section 19 of the Limitation Act 1980 provides that:
    “No action shall be brought, or distress made, to recover arrears of rent, or damages in respect of arrears of rent, after the expiration of six years from the date on which the arrears became due.”
However, the court held that section 19 was of no assistance to T because the arrears of original rent only fell due from 2006, and the reviewed rent only became due on the making of the arbitrator’s award ie: 22 August 2007.

On the second issue, the court held that there was nothing in the lease which (either expressly or impliedly) made time of the essence for the purposes of the rent review. Indeed, following United Scientific Holdings v Burnley [1978] AC 904 in which the House of Lords held that in a rent review clause time is presumed not to be of the essence, it is difficult to see how the court could have held otherwise. A landlord’s delay does not, of itself, relieve a tenant of its obligation to pay the reviewed rent.

In addition, the court could not see that there had been any conduct on the part of L (on which T relied) which could have given rise to any claim of estoppel or waiver of the right to recover arrears on late rent review.


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