Lancecrest Ltd. v Asiwaju

In a rent review clause, a time limit for the landlord’s trigger notice is not ordinarily of the essence unless the lease indicates otherwise. The tenant may make time of the essence by serving a reasonable notice requiring the landlord to act. A counter-notice is construed objectively and with practical common sense. It is sufficient if it clearly informs the landlord that the tenant does not accept the proposed rent; it need not use technical language or state an alternative rent unless the particular machinery makes that essential. The actual recipient’s later reaction is not relevant to the construction of the notice.

A landlord served a rent review trigger notice approximately 54 weeks after the contractual review date. The tenant replied that the notice was invalid because it was late and stated that he would not enter arbitration until a valid notice concerning a future review was served.

The county court held that the late trigger notice was valid but that the tenant’s letter was not a valid counter-notice. The tenant appealed on both issues. The Court of Appeal had to determine whether the landlord’s delay defeated the rent review and whether the letter sufficiently informed the landlord that the tenant did not accept the proposed annual rent.

1. Late trigger notice. The appeal failed on the first issue. Applying United Scientific Holdings Limited v Burnley Borough Council [1978] AC 904, the court held that the time limit in clause 5.1(b) was not of the essence. The clause contained no contrary indication and expressly made time of the essence for the tenant’s counter-notice. Section 41 of the Law of Property Act 1925 reflects the equitable rule that such contractual stipulations retain their effect according to equitable principles. The tenant could nevertheless have made time of the essence by serving a reasonable notice requiring the landlord to serve the trigger notice.
2. Counter-notice. By a majority, the appeal succeeded on the second issue. Neuberger LJ and Clarke LJ applied the objective and practical approach in Nunes v Davies Laing & Dick Limited (1985) 51 P&CR 310 and Mannai Investment Co Limited v Eagle Star Life Assurance Co Limited [1997] AC 749. The question was whether a reasonable landlord, knowing the lease and the surrounding circumstances, would understand the letter as informing him that the tenant did not accept the proposed annual rent. The tenant’s objection to the rent increase and the heading of the letter made that clear. No alternative rent or explanation for the objection was required by clause 5.1(c).
3. Neuberger LJ held that the actual recipient’s reaction must not be used in construing a notice, because that would create uncertainty and unfairness. Clarke LJ disagreed on that subsidiary point and considered the landlord’s reaction relevant evidence, but his reasoning supported the same result. Brooke LJ dissented on the counter-notice issue, considering that the letter challenged the validity of the review notice rather than the proposed rent.
4. The trigger notice was valid, the tenant served a valid counter-notice, and the rent from 5 February 2001 was therefore £28,000 per annum. The appeal was dismissed on point (i) and allowed on point (ii); the relevant county court order was set aside and permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): The appeal from the Bow County Court was dismissed on the late-trigger-notice issue and allowed on the counter-notice issue. The rent was determined to be £28,000 per annum from 5 February 2001.
• Bow County Court: Mr Recorder Hooper QC held that the late trigger notice was valid but that the tenant’s letter was not a valid counter-notice. The relevant decision was dated 25 February 2004 and the order was dated 27 February 2004.