The Time-of-the-Essence Trap � Starmark and Missing the Trigger Date
Where a commercial lease makes the landlord's rent review trigger notice mechanism 'time-of-the-essence', missing the trigger date permanently bars that rent review. In Starmark Enterprises Ltd v CPL Distribution Ltd [2001] EWCA Civ 1252, the Court of Appeal confirmed that where a deeming provision treats non-service of the trigger notice as agreement to continue at the existing rent, missing the trigger date loses the review entirely. Where no deeming provision exists, time is generally not of the essence for upward-only reviews (United Scientific Holdings Ltd v Burnley BC [1978] AC 904) and the landlord can trigger the review late.
- Starmark Enterprises Ltd v CPL Distribution Ltd [2001]: time-of-the-essence trigger notice trap � missing the deadline permanently bars that rent review
- Deeming provision = time is of the essence: if the lease deems rent unchanged on non-service of the trigger notice, the landlord must serve in time
- No deeming provision = not generally time-of-the-essence: the landlord can trigger the review late; the review is not permanently lost
- Professional negligence risk: surveyors and solicitors face significant liability for missing time-of-the-essence review deadlines
- Diarise all review dates as hard deadlines: treat every rent review trigger date as a hard deadline regardless of whether time is of the essence
RICS Arbitration Under the Arbitration Act 1996
Where the lease specifies arbitration, the rent review is determined by an RICS-appointed arbitrator under the Arbitration Act 1996. The arbitrator follows the rules of evidence, holds hearings, allows cross-examination of witnesses, and produces a binding award. The grounds for challenge are narrow: serious irregularity (s.68) or error of law (s.69 � usually excluded in commercial leases). Sealed offers protect a party on costs: if the award is no better than the sealed offer, the offering party recovers costs from the date of the offer.
- RICS appoints the arbitrator if the parties cannot agree; formal quasi-judicial process
- Award is binding and enforceable; most commercial leases exclude s.69 appeals on points of law � making the award final
- s.68 serious irregularity: the only remaining challenge route; requires a procedural failure causing substantial injustice
- Sealed offers: costs protection mechanism; if the award is no more favourable than the sealed offer, the offeror recovers costs from the offer date
Expert Determination � Binding Decision Without Full Process
Expert determination is faster and cheaper than arbitration. The RICS-appointed expert uses their own valuation expertise and may go beyond the evidence submitted by the parties. The determination is binding and virtually immune from challenge on the merits � challenge is only possible where the expert exceeded their remit, there was fraud or collusion, or there was a manifest fundamental error (Jones v Sherwood Computer Services plc [1992]). Expert determination suits straightforward disputes where the amount at stake does not justify full arbitration costs.
- Expert uses own expertise: not limited to the evidence submitted; may carry out own inspections and arrive at a figure not argued by either party
- Binding on the merits: no appeal because the expert reached a different valuation � only departure from remit, fraud, or manifest error allows challenge
- Jones v Sherwood Computer Services plc [1992]: jointly appointed expert has immunity from negligence claims for the determination
- Faster and cheaper: preferred for lower-value or straightforward disputes; no formal hearing or cross-examination
Comparables Evidence � The Basis for Open Market Rent
The open market rent is what a willing tenant would pay a willing landlord on the review date, in the open market, at arm's length, on the terms of the lease. Comparables are recent lettings of similar properties adjusted for differences in size, specification, location, and lease terms. An 'effective rent' analysis adjusts the headline rent for rent-free periods. Retail properties use ITZA (in terms of Zone A) zoning to normalise different-shaped shops. Parties must exchange comparable evidence within the lease-prescribed period or risk exclusion.
- Comparables must be adjusted: size (larger premises have lower rent per sq ft); specification; location; rent-free periods (effective rent analysis)
- ITZA zoning for retail: Zone A (front 6m) = full rate; rear zones reduce by half; normalises differently-sized and shaped retail units
- Exchange of evidence: missing the evidence exchange deadline risks exclusion of key comparables and a significantly worse outcome
- Expert's own inspections: in expert determination, the expert may identify and use comparables not put forward by either party