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RENT REVIEW - FREQUENTLY ASKED QUESTIONS
When is time of the essence?
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| If time is of the essence and
a deadline is missed - what happens? |
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| Has the notice been properly
served? |
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| What is the correct procedure? |
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| Can a landlord serve his trigger
notice after the rent review date has passed? |
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| Can the landlord increase the
rent after service of his trigger notice? |
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| No response to landlord's trigger
notice - what happens now? |
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| The tenant has carried out improvements
- are they included in the rental valuation? |
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When is time of the essence?
Whether time is of the essence in a rent review will depend
upon the terms of the lease. There is a presumption that time
is not of the essence but time will become of the essence
if the lease expressly says so or if it is a necessary implication
of the lease when read as a whole.
Some leases make time of the essence for certain steps but
not for others. It is essential to read the lease as a whole
before deciding whether or not time is of the essence.
If time is of the essence and a deadline is missed - what
happens?
The knock-on effect of missing a deadline during the rent
review process will depend on the lease provisions. It might
be that the opportunity to review the rent is lost until the
next rent review, or that the tenant loses the right to object
to the landlord's proposed increased rent. If you or the other
side have missed a deadline, you should take immediate legal
advice. Even if a tenant has missed a vital deadline, it may
be able to challenge the validity of the landlord's trigger
notice. A landlord in a difficult position may be able to
argue that time was not of the essence or that no trigger
notice was strictly required under the terms of the lease.
Has the notice been properly served?
When preparing a rent review notice (trigger or counternotice)
or reviewing one that has been served, you should always check
the following:
| Identity of landlord and tenant:
correct name and address? Has ownership passed since the
lease was granted? If a company, check with Companies
House whether the name or registered office has changed. |
| Address for service: The lease will
usually contain a 'notices' provision near the end. Check
this to see how and where contractual notices should be
served and whether there are any deemed service provisions.
If a notice has been served out of time, check whether
time is of the essence. |
What is the correct procedure?
Most leases will set out the procedure that the parties
should follow in conducting their rent review. You can expect
to find the following provisions in most leases:
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that either the landlord or
the tenant (or only one of them) may refer to the RICS
if the parties cannot agree the rent within a certain
period of time from the rent review date; |
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that the RICS will appoint someone to act
as either arbitrator or expert, his fees being paid equally
by the parties; and |
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that the tenant will pay the passing rent
until the new rent is agreed or decided, whereupon the
tenant will pay the new rent and the difference between
the passing rent and the new rent from the rent review
date plus interest. |
Some leases do not contain a trigger notice/counter-notice
procedure. Here, it is advisable for the landlord to send
a letter to the tenant proposing the new rent. Before doing
so, he should exercise his rights of access under the lease
to arrange a valuation. If this happens, the tenant should
try to have its valuation carried out either at the same time
or shortly afterwards to assist in the negotiations that will
take place later.
If the lease does set out a procedure, the parties should
adhere to it as closely as possible to avoid later criticism
and possible costs penalties. Again, the parties should check
whether time is of the essence for any particular steps.
Can a landlord serve his trigger notice after the rent
review date has passed?
If time is not of the essence, then unless the tenant
can argue estoppel or unilateral abandonment, the landlord
can serve his notice late. In the case of Lanecrest Ltd
v Asiwaju, the Court of Appeal held that a trigger notice
served more than 12 months after the rent review date was
not of the essence.
Can the landlord increase the rent after service of his
trigger notice?
The lease will usually state how much the tenant must
pay to the landlord whilst the rent review is ongoing. It
is common for the tenant to pay the passing rent until the
review is concluded, at which point he must pay the difference
between the passing rent and the new rent for the time between
the rent review date and the date the review is concluded.
Added to this, he may have to pay interest. The tenant may
agree, on a without prejudice basis, to pay a slightly increased
rent on a without prejudice basis in order to ease his cash
flow but this is unusual.
No response to landlord's trigger notice - what happens
now?
If time is of the essence and the tenant has failed to
respond to a validly served trigger notice, the tenant may
lose the right to challenge the figure proposed by the landlord.
This is known as 'deeming' and will only happen if the lease
contains a 'deeming' provision. Sometimes the existence of
a deeming provision can imply that time is of the essence
for a tenant's counter-notice, even where this is not expressly
stated. This will depend upon the wording in the particular
lease.
The tenant has carried out improvements - are they included
in the rental valuation?
It is common to find that improvements are expressly disregarded
in the rent review provisions found in the lease. However,
unless the lease expressly disregards improvements, the valuation
will include improvements. This is even the case where the
tenant has taken a bare parcel of land and then built upon
it. The premises to be valued will consist of the land, the
tenant's fixtures and landlord's fixtures. Tenant's removable
fixtures are not generally valued on review.
For further information or advice please contact propertylitigation@charlesrussell.co.uk
These notes represent only an outline summary
of relevant principles and detailed advice should always be
sought in particular cases.
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