The Gazette 1978

SEPTEMBER 1978,

GAZETTE

clauses and option type clauses providing for a review at the initiation of the Lessor. In the present cases however, he was of the opinion that the rent review Clause in the U.S.H. case was of the machinery or obligation type and that there was nothing therein to impute an intention to the parties that time was to be of the essence. As to the Cheapside case he did not think it incorrect to say that the Lessors had an option but it was not one that could be equated with an option to purchase as it was not intended to secure for the Tenant an interest in property but was merely to secure a variation of the term of the Lease. However, the Landlord in this case had in fact served the notice in the time required and Viscount Dilhorne stated that the question whether time was of the essence here did not therefore have to be decided in relation to that notice. What had to be decided was whether time was of the essence in refering the matter to the President of the R.I.C.S within the stipulated time and he decided that it was not, there being no reason to impute such an intention to the parties. He did state however that in his opinion that where a rent review has to be initiated by a Lessor and is not automatic (i.e. machinery) then time is of the essence when it is provided that the notice initiating the review has to be given by a said date. What puzzles the writer is that his Lordship agreed with Lord Diplock's observation on the earlier cases which includes the Iatters overruling of Samuel Properties (Development) Limited v. Hayek which case, as we have seen, discussed the effect of a classic option-type clause. Perhaps Viscount Dilhorne was referring only to Lord Diplock's observations regarding the inter-relation of the rent review and the hmk clause that was contained in that Lease the reasoning behind which would not conflict with his own views, but this is not clear. The new result of the U.S.H. and the Cheapside case so far as the United Kingdom is concerned may be summarised as follows: 1—No longer will the Courts differentiate between option type clauses and machinery or obligation type clauses as regards the effect of their exercise within a time stipulated in a rent review clause and further no longer will time be deemed prima facie to be of the essence in the exercise of what has been described as option type clauses. 2—A Landlord therefore may put into motion the machinery to review a rent after the stipulated time has passed unless he has been guilty of unreasonable delay and the Tenant has been prejudiced as a result to the extent that he has been deprived of the benefit which it was intended he was to obtain under the Lease. This is difficult for a Tenant to prove as he in fact will almost invariably benefit financially by a Landlords tardiness, as described beforehand. 3—The new rent can be retrospective to the original date for review contained in the Lease although not applied for by the Landlord by that date. 4—Time can be made of the essence in the usual way by the service of a notice to this effect after the review date has passed. 5—Time may be made of the essence in the first instance by the parties including in the Lease an express condition to this effect. Conclusion We have seen from the authorities cited the revolution in judicial thinking on this subject within a very short period 185

an irrevocable offer (being supported by consideration so that it cannot be revoked) and in order to be turned into a binding contract the offer must be accepted in exact compliance with its terms. This is required both in Courts of Law and Equity. Lord Diplock in the present case agreed that the time in which to exercise an option to renew or determine a Lease was of the essence. However such a true option had the effect of either bringing into being a new contract or ending an existing one respectively, while the determination of the new rent under a rent review clause does neither. Such determination of a new rent, it was stated, is merely an event on the occurence of which the Tenant had in his existing contract already áccepted an obligation to pay increased rents when determined from time to time and the Tenant's acceptance of this obligation is an inseverable part of the whole original consideration of the Landlords grant of a term of years for the length agreed. Without this it would be most unlikely that a Landlord would ever grant a Lease for more than a few years as inflation would very quickly make the original rent illusory. Lord Diplock was of the view that for the above reasons that the time stipulations in a rent review clause are not of the essence and even if the word "option" is contained therein as in the Samuel case this was not in the nature of a true option and was merely a dressing that would not take effect as such. Possible Detriment to Tenant This general principle having been laid down, which was a complete revolution in judicial thinking, the Court then looked at whether in the circumstances of the cases at hand a tenant would be prejudiced by the rent being determined at a date later than that stipulated in the Lease. If any such detriment could be found the Court could have leant in favour of the Tenant but Lord Diplock was of the view that the Tenant suffered no serious detriment with the possible exception that he did not know in advance what the increased rent would be, which in his Lordship's opinion was not a realistic prejudice as his own valuer could estimate same and he had the added benefit that he had the use of the money representing the difference between the original rent and the increased figure up until the date the new rent was determined. It was accepted however, that should the Landlord have caused unreasonable delay in exercising the review and the Tenant had suffered accordingly, in that event the Landlord may be effectually estopped from putting in motion the machinery to review at such later dates. In the absence of such detriment to the Tenant however the new rent when determined would be payable by the Tenant retrospectively to the review date contained in the Lease which as pointed out did not operate unfairly against the Tenant who has had the use of the rent money in the meanwhile. The remaining Judges with the exception of Viscount Dilhorne were unanimously in agreement with Lord Diplock both as to his reasoning and his views on the correctness of the previous cases referred to and Lord Salmon further disagreed with the decision in the Mount Charlotte case referred to above and considered that Templeman J. only held as he did as he felt bound by previous authority. Viscount Dilhorne agreed with his colleagues to allow the appeals in the present cases but did so on different grounds being of the opinion, contrary to that of the rest of the House, that there remained a distinction in law between machinery or obligation type