The Gazette 1978

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GAZETTE SEPTEMBER 1978,
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 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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