Rent Reviews – When is time of the essence?

6th March 2020 Commercial Litigation

Rent review provisions within commercial leases allow the landlord to review the amount of rent payable by their tenant at certain points within the lifetime of the lease agreement.

Is time of the essence?

Many of these rent review provisions are drafted in a manner that expressly states that “time is of the essence” with regard to when the rent must be reviewed. Failure to trigger the mechanism for reviewing the rent by the date prescribed within the lease may well mean that the right for the landlord to increase the amount of rent payable is lost. This can of course create serious issues for landlords (and solicitors drafting/advising on the terms of a lease) if the review date is missed.

Unfortunately it is not always clear from the wording of a lease when time is actually of the essence. To complicate matters further, and as a particular concern to landlords, a provision that time is of the essence can be implied meaning in absence of an express term.

The general presumption 

Fortunately for landlords, the case of United Scientific Holdings –v- Burnley BCC [1978] provides that the general presumption is that time is not of the essence unless there are sufficient contra-indications that provides otherwise. There are three recognised contra-indications:-

1.  Express wording within the lease suggesting that time is of the essence.

  • Such an example would be where the clause regarding rent review prescribes a consequence upon failure to comply (e.g. a tenant is deemed to have accepted a landlord’s proposed increase in circumstances in which the tenant fails to serve a counter-notice by a particular date).

2.  Surrounding circumstances suggesting that time is of the essence.

  • There are no reported cases in which surrounding circumstances have reversed the general presumption.

3.  The relationship between the rent review clause and another clause within the lease.

  • A common example of this is where the rent review clause is linked to a tenant’s option to determine the lease (e.g. the lease requires the landlord to serve notice of its intention to review the level of rent before a tenant serves a notice to determine the lease).

Regardless of which contra-indication is relied upon, case law suggests that the presumption that time is not of the essence is one that is not easily rebutted.

Despite this, as the failure to acknowledge whether time is of the essence can result in a significant financial loss for landlords, it is of the upmost importance that landlords and tenants pay careful attention to the rent review provision within their lease.

Should you have any queries or doubts regarding whether your lease contains a rent review clause in respect of which time is of the essence, then please contact JMW’s real estate litigation team who have experience in advising on this area of law.

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Tom Baylis is a Solicitor located in Manchesterin our Commercial Litigation department

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