There is much that can go wrong with rent reviews but it may be thought that the easiest part of the process is starting it.  

Quite often, rent reviews are triggered by notification by the landlord in writing specifying a proposed rent. If the tenant does not respond, or seeks to refer matters to a third party for determination, then it will be stuck with that rent. However, if the trigger notice is headed “without prejudice” or “subject to contract” then what effect does this have? It is a common problem for lawyers that these labels are used too frequently, and on important pieces of correspondence that you want to be very much “with prejudice”, or capable of being subsequently relied upon.  

The Facts

In Maurice Investments Limited v Lincoln Insurance Services5 the trigger notice served started by saying that the landlord wanted to “start the rent review procedure for June 2004”. It went on to say that the landlord wanted to “avoid the usual protracted negotiations… and would like to quote a rental at £360,000 per annum exclusive with effect from June 2004”. The letter was headed both “without prejudice” and “subject to contract”.  

The tenant received the letter, wrote to acknowledge it and was clearly in no doubt that the rent review process had been started. The parties did not agree the rent, the tenant did not elect to refer the matter to a third party, as required by the lease, and the landlord then claimed the rent would be as set in the trigger notice. The tenant resisted this and claimed that the heading to the notice, “without prejudice and subject to contract” meant that the notice had no legal effect whatsoever.  

The decision  

The judge found in favour of the tenant and said that whilst a reasonable recipient of the notice would think that the landlord was initiating the rent review, it was also possible for reasonable recipient to think that the landlord was putting forward an offer to reach a quick agreement and was not bringing into operation the formalities under the lease.  

Comment  

There has to be some doubt whether this case is good law and will be followed by the Courts. The landlord did appeal but the claim settled before it was dealt with by the Court of Appeal. The point to note, however, is that thought is needed regarding the application of the “without prejudice” and “subject to contract” labels. As with the landlord in the Maurice Investments case, putting such labels on correspondence unnecessarily could prove very harmful indeed as it could lead to the documents having no legal effect.

5 Maurice Investments Ltd v Lincoln Insurance Services Ltd [2007] 1P&CR 14