Challenging the landlord's rent figure

Citation

Dowden, M. (2001), "Challenging the landlord's rent figure", Journal of Property Investment & Finance, Vol. 19 No. 6. https://doi.org/10.1108/jpif.2001.11219fab.002

Challenging the landlord's rent figure

Challenging the landlord's rent figure

In Joseph Manuel Ray and Elizabeth Maria Rey v. Ordnance Estates Limited (11 June 2001) a tenant attempted to escape the consequences of its failure to serve a counter notice in time by attacking the validity of the rent figure set out in the landlord's trigger notice. The attempt (which must have been a last desperate throw of the dice) failed.

The lease was granted in 1987 at a rent of £15,000 p.a. In 1991 the landlord's agent served a trigger notice specifying a reviewed rent of £55,000 p.a. The tenants failed to serve a counter notice in time and, because the rent review clause expressly made time of the essence, could not run an argument based on the presumption stated in United Scientific v. Burnley BC.

The tenant argued that the landlord's notice was invalid because the rent figure had been arrived at fraudulently. It was alleged that the landlord's agent had either (i) adopted a valuation route that he knew to be quite wrong and which would produce a rental value that greatly exceeded the figure that would be arrived at by a proper application of the rent review provisions in the lease, or (ii) he had arrived at the specified figure without belief in its truth and recklessly, not caring whether it was true or false. The tenant cited Derry v. Peake (1889) 14 AC 337 as authority for the second possibility.

The judge emphasised that the burden of proof was on the tenant and that because fraud had been alleged that burden must be discharged by sufficiently cogent and convincing evidence.

Certainly, an uplift of such proportions would have been highly unusual in the market conditions prevailing in 1991. However, having heard evidence from the landlord's agent about the manner in which the valuation exercise was carried out the judge (Simon Berry QC) considered that the tenant's allegations were unfounded. Having reached that conclusion, the judge did not have to decide whether, if the valuation had been fraudulent or reckless, that would have been sufficient to invalidate the landlord's notice. Consequently, there remains the possibility that others – perhaps those who now fall foul of a Starmark-type sitation – might be driven to such an argument.