Rent Review Arbitrations: A trap for the unwary
In a recent rent arbitration case an issue arose as to whether the Arbitrator (who had been appointed by the President of the Royal Institute of Chartered Surveyors in relation to a rent review) had been appointed in time, and whether he therefore had jurisdiction to determine the rent. The Arbitrator was asked by the parties to determine as a Preliminary Issue whether he had jurisdiction.
The question was whether the demand for the appointment of the Arbitrator had been made in accordance with the statutorily prescribed timetable contained in Section 12 of the Agricultural Holdings Act 1986. At the Arbitration the parties were not legally represented. The Tenant succeeded before the Arbitrator who decided that he did not have jurisdiction. The Landlord appealed the decision of the Arbitrator to the High Court. Michelmores was instructed on behalf of the Tenant.
- The Tenant was protected in relation to the Holding under the provisions of the AHA 1986. It was pursuant to a Tenancy Agreement entered into in August 1999.
- Clause 1(a) of the Tenancy Agreement provided that:
The landlord agrees to let and the tenant agrees to take all that agricultural holding (including the farmhouse and buildings thereon) known by the name of [the] Farm...commencing on the 6th day of April 1999 and continuing from year to year until determined at the end of any year of the tenancy by not less than twelve calendar months' notice in writing".
- On 30 April 2011, the Landlord served a Notice pursuant to Section 12 of the AHA 1986 requiring a rent review in accordance with the statutorily prescribed formula and timetable.
- On 5 April 2012, the Landlord's agents made an application to the President of the RICS for the appointment of an Arbitrator, being a demand in accordance with the provisions of Section 12(3) of the AHA 1986(5). Section 12(3) provides that
"a demand for arbitration under this section shall cease to be effective for the purposes of this section on the next termination date following the date of the demand unless before the said termination date:
- an arbitrator has been appointed by agreement between the parties, or
- an application has been made to the President of the RICS for the appointment of an arbitrator by him.
Section 12(4) AHA 1986
Section 12(4) provides that references in this Section 12 (and Schedule 2 of the AHA 1986) in relation to a demand for arbitration with respect to the rent of any holding, to "the next termination date following the date of the demand are references to the next day following the date of the demand...on which the tenancy of the holding could have been determined by notice to quit given at the date of the demand".
Following the application to the President, the Arbitrator was duly appointed on 12 July 2012, but that is not a determination of jurisdiction by the RICS, merely an administrative function.
The Arbitrator decided that, for the purposes of complying with the provisions of Section 12(3), the demand for arbitration made on 5 April 2012 was a day late and that the "next termination date" for the purposes of the Section was 5 April 2012 and that the demand for arbitration needed to be made before that date, namely it needed to be made on 4 April 2012 at the latest.
In the appeal, the Landlord placed reliance upon the Court of Appeal decision in Yeandle v Reigate Borough Council , where Lord Justice Leggatt explained that a notice to quit a tenancy ending at midnight between 28 and 29 September can specify either of those two dates as the date for delivery of possession because "the tenancy would be construed as ending on the last moment of the 28th or the first moment of the 29th. In other words, because they both identify the end of the relevant period of 12 months, they mean the same as each other in this context".
In the appeal, on behalf of the Tenant, reliance was placed on the case of Thompson v Bradley (2006), a decision in the Birmingham County Court, albeit allocated to the Chancery Business List. The relevant facts in that case were:-
- The lease commenced on 29 September 1996 and was held by the tenant from year to year, until determined at the end of any year of the tenancy by not less than twelve calendar months notice in writing.
- The Judge determined that "the start date of any one year's tenancy is the 29th September and the last of it is the 28th September".
- The Judge observed that the "termination date", for the purposes of interpreting the notice under consideration in that case, meant 28th September 2005. He found that "Section 12 of the 1986 Act required the application for the appointment of the Arbitrator to have been made before the termination date, namely, at the latest, on the 27th September 2005".
Applying those facts and analysis to the case under appeal, it was submitted on behalf of the Tenant that:-
- The Tenancy Agreement commenced on 6 April 1999.
- The "start date" was therefore 6 April. The "last date" was therefore 5 April
- The termination date, adopting the position in Thompson v Bradley, would be 5 April and the last day for making the application pursuant to Section 12(3) would be the previous day, namely 4 April.
After the legal arguments were exchanged, the Landlord conceded. Whatever the outcome of the appeal might have been, had it proceeded to a Hearing, the one thing which is absolutely clear is that anybody seeking to activate a rent review should not leave it to the last moment.