What happens when a Landlord delays in exercising a rent review in Scotland?

Rent review clauses are a key provision of a lease. They enable a landlord to increase the rent periodically to reflect changing market conditions. Normally a lease will provide a series of "rent review dates" throughout the duration of the lease at which the rent review should take place. 

However, what happens if a landlord acquires a property and realises the last rent review date was a few years ago, or if the landlord has simply forgotten to exercise the option?

There are generally two main arguments against the landlord carrying out a rent review in those circumstances.

Time of the essence

First, if the relevant clause makes time 'of the essence', it may be too late. In other words, some rent review clauses include a strict time limit which clearly must be complied with. However, this is rare. And generally, if there isn't wording which makes it clear that the timetable must be strictly complied with, then time is not of the essence. The court's reasoning for the default position being that time is not of the essence is that delay in exercising a rent review doesn't cause a tenant any serious disadvantage. Indeed, it may be to a tenant's benefit as it can use its funds for other purposes in the interim.

It's therefore important to carefully review a rent review clause to see if it contains any time limits and, if so, to carefully diarise the key dates and to ensure compliance. If there is no wording in the lease imposing a strict time limit, then it is still good practice to trigger a rent review ahead of time. But, generally, there will be no issue with commencing the rent review process late, even following a fairly significant delay.

If you have concerns about whether time is of the essence in relation to the specific wording found within a rent review clause, you should obtain legal advice.

Personal bar/waiver

Secondly, if a landlord ignores the rent review provisions in a lease and continues to charge rent at the previous rate, it may be argued under the common law that the landlord has personally barred itself from exercising its right to review the rent. However, even if this has occurred, it is common to find a clause in a commercial lease which disapplies this common law principle. Therefore if this argument is made by your tenant, you should carefully review the terms of your lease and obtain legal advice if any uncertainty remains.

If you need advice on rent review then please get in touch with our Real Estate Litigation team or your usual Brodies contact.