The Gazette 1981

GAZETTE

SEPTEMBER 1981

contract". Since the Supreme Court ofJudicature Act (Ire.) 1877 the rules of equity prevail. Time could not normally be considered to be of the essence in rent review clauses. They were not options, but merely varied a term in the contract of tenancy. No hardship would be caused by a failure to initiate promptly a rent review. When Time is of the Essence (a) Principles The Supreme Court accepted in Hynes v. Independent Newspapers Ltd. that time could be of the essence in rent review clauses, although it was not normally so. O'Higgins C.J. implicitly adopted the rule of law set out in the passage from Halsbury's laws cited above, and Kenny J. accepted a passage to similar effect from Fry on Specific Performance: 5 "Time is originally of the essence of the contract in the view of a Court of Equity, whenever it appears to have been part of the real intention of the parties that it should be so, and not to have been inserted as a merely formal part of the contract. As this intention may either be separately expressed or may be implied from the nature or structure of the contract, it follows that time may be originally of the essence of a contract, as to any one or more of its terms either by virtue of an express condition in the contract itself making it so or by reason of its being implied." (b) Application of Principles Express terms in the contract may make it clear whether time is (or is not) of the essence. Where they do not, then it may be implied from the subject matter of the contract 6 or from the surrounding circumstances that time is of the essence. The fact that the lease is of a commercial character will not be sufficient, but it could make a difference ifthe rent review is associated with other provisions. Both in the Burnley case and in Hynes v. Independent Newspapers, it was suggested, for instance, that the presence of a "break" clause would be relevant. Under a clause of this kind, the tenant is given the right to elect to determine prematurely by surrender his interest in his property under the lease. This has the converse characteristics of an option and, like an option, there are practical business reasons for treating time as of the essence. If a break clause and a rent review clause are closely linked as, for instance, with the intention to give the tenant a choice either to remain in possession at the higher rent, or to determine the lease then, by necessary implication, time would have to be of the essence in relation to the rent review in order to allow the tenant to make this choice. In a recent case in England, Al Saloom v. Shirley James Travel Service Ltd. 1 the Court of Appeal reached a similar decision, as a matter of interpretation, where the two provisions were found in a single continuous integrated clause, even though the intention may not have been to enable the tenant to break upon news of a rent increase, since the periods specified were identical. Waller LJ. indicated that "The phrase must mean the same in each case, that time was o^the essence in both or in neither. The phrase would not change its meaning in the course of 10 lines unless there was some qualifying phrase to make a change clear."

From what date is the new rent payable? There are three possible dates from which the revised rent could be payable. The first is the date on which the rent is agreed or fixed; the second, the date on which the review procedure was initiated; and the third, the date fixed by the contract. Arguments in favour of the first two are, respectively, that rent must in its nature be certain and that a tenant ought to know in advance his maximum liability for rent. The contractual date, however, was that upheld in both the Burnley and Hynes cases. Rent, it was said, is what is payable under the terms of the contract of tenancy. It need not be certain in advance. Moreover, the tenant would have a fair idea of his likely liability for rent, even where this had not been fixed, since this could be estimated for him by an experienced surveyor. Where the tenant is prejudiced Both in Burnley and Hynes it was emphasised that a tenant would not normally be prejudiced by a delay in fixing a new rent and this was a factor in their respective decisions. Prejudice to the tenant would, however, be possible, particularly if a delay were long. A number of resolutions to this problem are possible. (a) Initiation of review by tenant The lease may contain express provision permitting the tenant to initiate a rent review, but even where it does not, he can remind the landlord of the right to make a review. A significant delay on the part of the landlord might then give rise to an estoppel. 8 (b) Service of notice by tenant In a case where time is not of the essence, the tenant can make it of the essence by serving a notice giving the landlord a time limit within which to initiate a review (or take any other steps necessary on his part). Provided that this period is reasonable, he can thus make time of the essence. Lord Diplock and Lord Fraser, in the Burnley case, both suggested that such a notice could be served immediately the date stipulated by the contract had passed. 9 Presumably, even where there is no time limit in the contract, this method could be adopted. (c) Damages Where a tenant suffers loss (or other damage) by a failure to review on time, then, if the landlord is in breach of contract, he could be held liable in damages. 10 The fact that time is not of the essence does not make it any the less a breach of contract to fail to observe time in the contract, nor does there necessarily have to be an obligation to review on the part of On equitable principles, where a person so conducts himself as to lead another to act to his detriment, then he may be prevented from acting inconsistently with the belief he has induced. A long delay in instituting a rent review could be seen as an implied representation that no increase would be sought, so that the landlord would be estopped from claiming a review of the rent. As Lord Salmon said in the Burnley case," "any unreasonable delay caused by the landlords and which is to the tenants' prejudice would prevent the rent being revised after the review date". O'Higgins C.J. in Hynes accepted "That there may be circumstances in which delay has been extreme or where, because of it, other factors have arisen which alter the equities". Clearly, a short delay would not entitle the tenant the landlord. (d) Estoppel

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