It is a common misconception that a Lessor waives its right to administer a rent review clause if not administered in accordance with the timing under the Lease.
The Law Courts in the United Kingdom and more recently in Australia, have considered rent reviews instituted outside the time limits imposed in lease provisions. The House of Lords (United Kingdom) held that although commercial leases are business transactions, the time provisions generally are not essential conditions of rent reviews and the lessor does not lose the entitlement to a review merely because some procedural requirement has not been observed within the agreed time (United Scientific Holdings Ltd v Burnley Borough Council (1978) AC 904).
This position has been judicially approved in Australia (for example, Payce Properties v BBC Hardware [1999] NSWSC 968 and on appeal in BBC Hardware Ltd v Payce Properties Ltd [2000] NSWCA 262; National Mutual Life Association of Australasia Ltd v Ampol Ltd (1983) 3 BBR 9101; Raves & Ors v Fobone Pty Ltd (1991) NSW ConvR 55-564; Jacques Nominees Pty Ltd v National Mutual Trustees Ltd [2001] VCAT 657; and GR Mailman and Associates v Wormald (Australia) Pty Ltd (1991) 24 NSWLR 80). In National Mutual, Clarke J [at 9105] noted that “the right accorded to lessors in leases, particularly long term leases, to revise the rent upward is an important and unseverable part of the consideration for the granting of the lease”, and that “the parties should not be taken to have contemplated that that right be lost by a failure to comply with the timetable activating the change”. Time for performance of the obligation may be of the essence where:
- it is expressly provided so in the lease; or
- the lease contains a clear indication that time for performance is essential – for instance, where there are adverse consequences flowing from non-compliance with the time limit for exercising the market rent review.
The mere fact that a dispute about the rent is to be referred to mediation in the first instance, and a valuation in the second, is not an adverse consequence that flows from the non-compliance with a time limit.
In Payce Properties, Einstein J considered that the absence of “any provision at all as to the effect, if any, which the parties intended to attach by way of consequences of non compliance with the time limit” supported the conclusion that time was not intended to be of the essence for that clause. In the absence of any contra-indications, the accepted position at common law is that time for the exercise of a rent review is not intended to be of the essence.
Furthermore, it has been held that, where time is not of the essence, there is no implied term that the notice must be given within a reasonable time after the time specified. As stated by Oliver LJ (as he was then) in Amherst v James Walker Goldsmith & Silversmith Ltd [1983] Ch 305 at 315, “I know of no ground for saying that mere delay, however lengthy, destroys the contractual right” to require a review to market. This view has been approved by Rogers CJ in Maritime Services Board of NSW v Australian Shipping Commission (1991) 27 NSWLR 258 at 278-9.
LEONIE BLAZEY
Lawyer
Property and Finance
