Posted: Thursday 24 May 2012
How pedantic do you have to be?
By Hugh Angus
When I started writing this blog, I hoped that most of the topics would be driven by the interesting cases that were reported on each week in our Real Estate Bulletin. I am naturally optimistic, although this does surprise many people who know me. But there have been fewer of those cases than I hoped. This week though, we report on a case which probably just counts as interesting for anyone involved in commercial property.
The surveyor acting for the landlord served a rent review notice where the name of the landlord and the rent review date were wrong. His attention having been drawn to the error (the report does not say who by), he served another notice. This time the identity of his client and the rent review date were correct. Both notices were, probably, in time. The tenant did not serve a counter-notice within the 3 months specified in the lease.
The court held the first notice was defective – even a reasonably informed recipient would be left in doubt over what was intended. The second one was accurate enough. Being right about the landlord and the rent review date is not just being pedantic.
The tenant ran a number of arguments to avoid having to pay the increased rent specified in the notice.
- It argued that the service of the second notice was invalid as it was not executed by an officer of the landlord. The court said that did not matter as the notices clause was permissive and not mandatory. This was the tenant being too pedantic.
- The court held that, where the lease provided that 3 months’ prior notice had to be served, this did not mean exactly 3 months but at least 3 months, and the tenant could not argue otherwise. Pedantic or not?
- Most significantly, the court held that time was of the essence for the 3 month counter-notice because, if one read the lease properly, it did contain a deeming or default provision. So the tenant had no more that 3 months to serve a counter notice, not a day more. A victory for “precision”.
So the landlord won 4 -1, with a great review of all the time of the essence cases. What can we take from this?
1. However bad you are at names, remember the name of your own client.
2 . Rent review dates are quite important so read the lease carefully enough to identify them – especially if this is the second review and you had served the notice correctly 5 years previously.
3. If serving a notice, try and give yourself enough time to correct any mistakes – there is a corollary to Sods Law that the probability of a mistake increases the less time there is to correct it.
4. If you receive anything that might be a rent review trigger notice, serve a counter-notice. I think that if the tenant had served almost any sort of counter-notice, even to the first defective notice, it could have avoided paying the rent demanded. Except of course if you are absolutely certain the notice is defective and the landlord might have lost the right to a review for any significant length of time.
5. The law on time of the essence is, in theory, the same each side of the Border. But it looks like in practice Scottish courts are more likely to indicate that time is of the essence than the English courts are.
6. The rent in the landlord’s Notice was only £58,000 per annum. I don’t know how much over the market rent that was. My litigation colleagues guess that the expenses of the case, which would have been picked up by the losing tenant, are about £20 -30,000. It is much cheaper to have to employ administrators, surveyors and lawyers to get it right than to fix mistakes.
7. You have to know when to be pedantic to be a commercial property lawyer or rent review surveyor.
