The definitive case on this is United Scientific [1977], where the general principle was clearly laid down that time is not of the essence in rent review clauses – unless there are ‘contra-indications’. Basically, that means that time will not be of the essence unless there is (i) express wording to the contrary, or (ii) it is implied by language used, or (iii) a ‘warning notice’ is served by one party on the other expressly making time of the essence in relation to an express term of the lease.

What now seems to be developing is a willingness by the courts to allow a ‘warning notice’ to be served so that time can be made of the essence in respect of implied contractual obligations – such as an implied term that rent review procedures will be dealt with efficiently, ‘for reasons of business efficacy’. It is this principle that is now attracting attention and which has considerable scope for development.

Consider Barclays [2002], where only L could apply for the disputed rent to be determined by a third party (and there was no time limit imposed on L). After a four-year delay, T gave L 28 days’ notice for time to be of the essence, with T arguing that ‘business efficacy’ required that such a provision be implied into the lease. The court agreed. Likewise in Northern [2004], the lease said that if the rent could not be agreed, then the parties should agree on a surveyor and then refer the dispute to that surveyor. After 18 months delay, T wrote to L giving 28 days’ notice for L to apply to the RICS for the appointment of a surveyor. The court agreed that there should be an implied term (for reasons of ‘business efficacy’) although on the facts it was held that T had not first had to agree on an independent surveyor. Despite that technical victory for L, the case is clear authority that a time requirement can be implied into a lease on grounds of business efficacy.

These two decisions are very important in the context of rent reviews. What is clear is that L cannot simply ignore a review timetable. Instead, T can make life difficult for L, and whilst L may be keen in a falling market to avoid a rent review, T may well be in a position to force such a downwards review. Moreover, there seems no reason why further implied terms cannot be incorporated into leases for business efficacy. For instance, an obligation for L to provide service charge statements promptly, and to deal with the issue of dilapidations prior to the termination of the lease, would also seem to come within the scope of this approach.

In summary, these cases have now confirmed that the courts will imply terms and timescales into leases for business efficacy. That being so, it is then open to T to make time of the essence in respect of those terms. For a commentary see [2004] 133 Property Law Journal 2. © Practical Lawyer