Time of the essence?

Equity took the view that time is not of the essence for performance of contractual obligations unless the express words of the contract, the nature of the subject matter or the surrounding circumstances indicated to the contrary. After the Judicature Act 1873, this is the common law rule too. Thus, time is not usually of the essence with respect to the timetable in a rent review clause; the right to a review is not lost because of  a delay in taking any step envisaged by the clause.

Rent is a contractual payment for the use of the landlord’s land. There is no legal reason why a rent review cannot operate retrospectively.

United Scientific Holdings Ltd v Burnley Borough Council ([1978] A.C. 904, HL) concerned the rent review provisions in two leases. In each case, there was a failure to strictly adhere to the timetable established by the rent review clauses. The tenants claimed that time was of the essence with regard to each element of this timetable and that the result was that the landlord had lost its right to a review. The tenants also argued that, even if the landlord was entitled to a  review, the reviewed rent would only be payable once it had been fixed; there could be no retrospective obligation to pay the increased rent as from the review date. This, they argued, would run counter to the requirement that the rent be certain.

The tenants failed on both counts. The House of Lords pointed out that equity had taken the line that time is not of the essence for performance of contractual obligations unless the express words of the contract, the nature of the subject matter or the surrounding circumstances indicated to the contrary. After the Judicature Act 1873, this is the common law rule too (Judicature Act 1873, ss. 25(7) and (11) and Law of Property Act 1925, s. 41). Lord Simon of Glaisdale referred to the approach now adopted following Hongkong Fir.

There was nothing here to indicate that time was of the essence. Thus, the landlords could still invoke the rent review clause. The right could only be lost if the delay meant that it would be inequitable (not so here). It might be otherwise in cases where the tenant has a break clause that it can invoke once the review date has passed; this might be a circumstance indicating that time is of the essence.

The contractual provision that required the tenant to pay the arrears (if any) of the increased rent from the review date to the date when the revised rent is ascertained was also lawful. Rent is a contractual payment for the use of the landlord’s land. There is no legal reason why a rent review cannot operate retrospectively.

The nature of the process of fusion begun by the Judicature Acts is a major theme in several of the judgments.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: