Welcome news for landlords with forgotten rent reviews

09/06/2010

By Mark Steggles, Senior Associate in Dispute Resolution.

A recent court case held that even a 13 year delay in exercising a rent review was not enough to prevent the landlord from triggering a review in the absence of any other factors.

The rent review clause

A lease was due for a rent review in March 1994. No review had been triggered when the tenant took an assignment of the lease in October 2005. The landlord started the rent review process in late 2006 and after referring the matter to arbitration obtained an award in August 2007 for an uplift in rent between the period March 1994 to September 2007 and increased rent with effect from 29 September 2007. The tenant took no part in the arbitration process. The landlord sought to forfeit the lease as a result of non payment of both the uplift and the revised rent.

Issues for the tenant

The tenant sought to argue that it was too late for the landlord to trigger the rent review process as the landlord had abandoned its right to review the rent due to the delay. As a preliminary point, the court decided that because the tenant had not raised the argument during the arbitration, he could not raise it at court. However, the court took the opportunity to confirm that the wording of the rent review clause did not make time of the essence and that mere delay on its own cannot result in the landlord losing his rights to implement the rent review.

Practical advice

This case stands as a welcome tonic to landlords who will be reviewing their portfolios and a warning note to tenants. Concerned tenants may consider making time of the essence for the purposes of rent review by serving notice on landlords where appropriate rather than risking further delay. Potential assignees should ask for evidence of the outcome of rent reviews that should have been completed before the date of the assignment and ensure that appropriate safeguards appear in the sale contract.