The Gazette 1978

SEPTEMBER 1978,

GAZETTE

serving a Rent Review Notice within a stipulated time) be entitled to review the rent. The important difference between a clause such as this and that referred to above is that the Landlord here does not have what may be termed an option to review the rent as no rent is reserved beyond the initial portion of the entire term and therefore it is mandatory to do so under the machinery provided in the Lease. We now turn to the difficulties that can be encountered in the exercise by a Landlord of a right to review, the most usual one being where a Landlord purports to exercise such a right outside the time allowed for doing so in the Lease. The question arises as to whether he is then entitled to review or whether he will be bound to the rent in the preceding period until the next date, possibly seven years later, allowed in the Lease for review. This can create serious problems as where a property is let in 1970 for twenty four years with proviso for review every six years the machinery for such first review to be put into operation on a specified date in 1976 and the Landlord failing or neglecting so to do. With the property boom having taken place during this period the rental value of properties has escalated concurrently and a failure to review in the time limit allowed in a Lease could result in an enormous loss of rental income.lt is in this context that it is so important to differentiate between the two types of review clauses described beforehand although the House of Lords in the two decisions referred to in 1977 has thrown a new light on the interpretation of such clauses thus leaving the door open to the Irish Courts to follow suit, the alternative being to stay in line with previous judicial thinking as to the strictness to which time limits are to be adhered. The Option-type Clause The first type of clause referred to where a rent is fixed for the entire term of the Lease subject to review at stated times was, until the House of Lords recent decision, deemed an 'option' on the part of the Landlord and as such time was deemed to be of the essence automatically in the exercise of that option even in the absence of a provision making it so and as a result the Landlord was obliged to comply strictly with the time limits set out in the Lease in respect of the dates on which the machinery for the review of the rent was to be put into motion. Failure to do so precluded him from reviewing the rent until the next stipulated date which might be a number of years hence. It has long been settled that to exercise an option under a Lease there must be strict compliance with the requirements of the option and as was stated in the 1876 case of Finch v. Underwood 2 Ch.D. 310 the right to exercise such an option is a privilege that requires due compliance with any condition precedent. The condition precedent in such cases is generally the service of notice to review the rent on the Lessee at a stipulated time and failure to serve on or before the prescribed date will preclude the Lessor from fulfilling that condition which would otherwise have allowed him to exercise the option. This general principle stated in Finch v. Underwood has been reiterated by Kenny J. in Cassidy v. Baker (1969) 103 Irish Law Times Reports 40 which case concerned an option to purchase in which the time limits in which to take up the option were not complied with thus precluding its exercise. It must be pointed out that until 1977 in England at least, an option to review a rent would not be treated any differently from other options such as to

renew a Lease in which the principle that all tiifte limits must be strictly adhered to applies. This attitude of strict adherence being required to the time limits within which to exercise an option to review had received favour in the Courts up until 1977 when the House of Lords came to a different conclusion unless there was an express clause in the Lease making time of the essence in which to exercise the option. However, we.shall examine initially the case law prior to 1977 as there have been no equivalent judicial precedents set in this country and it is by no means certain which course our own Courts will choose to follow. The Samuel Prooerties Case — A Hard Line In the case of Samuel Properties (Developments) Limited v. Hayek (1972) 2 A.E.R., (1972) 3 A.E.R. at page 473 a Landlord granted to a Lessee a flat for twenty one years from the 7th July 1964 at a fixed rent of £1,575 per annum for the entire period. Schedule 4 of the Lease provided in paragraph 1 "that the yearly rent reserved by the Lease shall be subject to review at the option of the Lessors in the seventh and fourteenth year of the term hereby granted in the manner provided . . . " and paragraph 2 of the said Schedule provided that the manner of review was by service by the Lessor of notice on the Lessee not later than two quarters before the expiry of the seventh and fourteenth years of the said! term. The seventh year expired on the 7th July 1971. Owing to an oversight on the Landlords part notice was not served until 22nd February 1971 which was not two quarters (i.e. six months) in duration. The Lessee rejected the validity of the notice and refused to pay any increased rent whereupon the Landlord sought a declaration that the notice was valid and effective and that time should not be considered of the essence and that the notice had been served in a reasonable time. It was further contended in the alternative that if the time requirement was strict then equity should allow them relief arising out of their mistake. Russell J. in the Court of Appeal held that the time requirement was to be treated as inflexible as the right to exact an additional rent was conferred by the bargain between the parties as an express option which would be effective if the condition precedent was complied with (i.e. the service of the notice within the time limits specified) and a similar conclusion had been previously reached by Goulding J. in C. Richards and Son Limited v. Karenita Limited (1971) 221 Estates Gazette page 25. As stated above, to exercise an option under a Lease there must be strict compliance with the terms of the option and there clearly in this case was no such compliance. Russell J. continued by pointing out that in contracts for the sale of land that a time schedule laid down therein is intended to establish guide lines rather than imperative requirements. By this the writer presumes is meant that the date of completion per se in a contract for sale does not make time of die essence unless there is a term to this effect in the contract or a notice to the defaulting party making time of the essence is served. Counsel for the Lessor in the present case invited the Court to adopt the view that time was not of the essence in Schedule 4 Paragraph 2 and he relied on an analogy between time limits in the clause presently under considerationand a completion date in a contract for sale and cited inter alia the case of Stickney v. Keehle (1915) Appeal Cases. Russell J. however, did not accept the proposition (and rightly in the writer's opinion as the views expressed in that case were comtemplated to apply

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