Often, legal documents will say that if a party to the document wishes to do a certain thing, notice must be given by a specified date. The lay person may be forgiven for thinking that if that deadline is missed, it is too late to give notice afterwards. However, this is not always the case!
Only if the Court concludes that ‘time is of the essence‘ in respect of that date, will it regard it as an unbreakable deadline. Otherwise, the Court’s requirement will be that it be done within a reasonable time.
Rent review date
A good example of this is where a landlord has a right in a lease to call for a rent review on a defined ‘Rent Review Date’. The lease will often say that if the landlord wishes to exercise this right to a rent review, then the landlord must say give written notice to the tenant at least three months before the rent review date. However, unless the lease says that ‘time is of the essence’ in this respect, the landlord may still be allowed to trigger the rent review later.
The reason is that the Courts are influenced, in part, by the potential disadvantage to the landlord (in terms of potential loss of rent) if strict adherence to the rent review date was required. This is set against the ability of the tenant to take matters into its own hands if strict adherence was not required, as tenants usually have the ability to serve notice on the landlord to make ‘time of the essence’.
However, there are other situations where the Courts will treat a deadline as ‘time of the essence’, even when this is not expressly stated and agreed in the document.
One usual situation would be if one party will be heavily disadvantaged by the other’s failure to serve the relevant notice by the specified date. For example, take a lease where the tenant has a right to terminate the lease one year after the rent review date. If the landlord tried to trigger the rent review date to increase the rent at a later date than specified, the tenant (who has to make the decision whether or not to terminate the lease, but would not know the landlord wanted to increase the rent) may be prejudiced. As such, the Court may reject the landlord’s right to trigger the rent belatedly.
Another example emerged from the following case which was reported recently.
Here, the right in question was the right for the Landlord of an apartment block to serve notice late to increase the ‘on-account service charge payment’ due from the Apartment Lease Owners (i.e. the ‘Tenants’ under their Apartment 125-year leases).
The Leases said that the Tenants should each pay £180 twice yearly on the 1 April and 1 October each year, on account of the service charge they would have to pay when the year-end service charge accounts were settled. If the Landlord wished to increase the on-account payments, then the Landlord should serve notice on the Tenants of such intention “not less than one month prior to the commencement of that financial year [i.e. 1 April]”. The Landlord had sent a letter to the Tenant in August 2019 requesting payment of half-yearly instalments in excess of £180 per half-year for periods running from 1 April 2018, 1 October 2018, and 1 April 2019. The Court of Appeal held that the letter of August 2019 did not operate as a notice to increase the maintenance contribution under clause 4(2)(x). Time was of the essence for the service of such notice.
In contrast to the rent review situation, where dates for service of rent review notices are not usually considered to be ‘of the essence’, the Landlord was unlikely to be heavily disadvantaged by a requirement for strict compliance. All that the Landlord was prevented from doing was to increase the interim service charge. Time would not be of the essence in respect of the levying of a final service charge at the end of a financial year. However, a Tenant needed to know in advance of any service charge year whether ongoing service contributions were to increase. So the time for service of the Landlord’s notice increasing the on-account payment was determined to be ‘of the essence’; the Landlord had missed the date and could not belatedly trigger the increase.
The lesson is:
‘If you want a deadline to be a deadline, say in the document that in respect of that date ‘time is of the essence’.
How can we help
For advice on or further information concerning the subjects discussed in this article, please contact Martin Jinks (Notary and Solicitor), Vikky Lai (Trainee Solicitor), or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.contact us