House of Lords
Published May 7, 2007

Riverside Housing Association Ltd v White and Another
Before Lord Hoffmann, Lord Rodger of Earlsferry, Lord Brown of Eaton-under-Heywood, Lord Mance and Lord Neuberger of Abbotsbury Speeches April 25, 2007

A tenancy agreement issued by a housing association stating that the rent would be increased annually with effect from the first Monday of June each year did not prevent the landlord from increasing the rent from a date after the first Monday in June, provided appropriate notice was given to the tenants.

The House of Lords so held allowing an appeal by Riverside Housing Association Ltd from the Court of Appeal (Lord Justice Auld, Lord Justice Hallett and Sir Peter Gibson) ([2005] HLR 15) who allowed an appeal by Gary White and Ellen White from Judge Stewart, QC, determining a preliminary issue at Liverpool County Court on July 9, 2004.
Mr Andrew Arden, QC, Mr Jonathan Seitler, QC and Mr Iain Colville for Riverside; Mr Jan Luba, QC, Mr Michael Barnes, QC and Mr Adam Fullwood for the tenants; Mr Christopher Baker and Mr Tom Leech for the Housing Corporation, intervening.

LORD NEUBERGER said that section 2(6) of the tenancy agreement provided that Riverside could increase the rent by giving the tenant four weeks notice in writing. Subsection (7) provided the rent payable would be increased annually with effect from the first Monday of June each year. Subsection (8) required Riverside to calculate the annual increase in weekly rent by reference to the publication of The General Index of Retail Pricesand The Index of Average Earnings for the 12-month period to December 31 immediately prior to the next rent variation date.

In 2000, Riverside imposed no rent increase. However, in February 2001 it wrote to the tenants giving them notice that the rent would be increased from April 2, 2001. In subsequent years Riverside gave similar notices in February purporting to increase the rent from a date in April.

The tenants contended that those notices were ineffective because Riverside only had the right to increase the rent if it served a notice which took effect on the first Monday of June with 28 days prior notice, and each of the notices had been plainly ineffective because it was served long after the rent variation date, and also because it purported to increase the rent from a day in April.

There were three possible interpretations of the rent review provisions:
(i) Riverside could increase the rent payable in any year only on the first Monday in June and, in order to do that, it had to give at least 28 days notice.
(ii) Riverside could increase the rent in any year only on the first Monday in June, but the requirement that it gave 28 days notice was not essential, and accordingly it could give late notice to increase the rent on that date.
(iii) Riverside could increase the rent only once in any year from the first Monday in June, and it could exercise the right to do so on any date from and including the first Monday in June, provided it gave 28 days notice.

The first two interpretations accorded with what those familiar with commercial rent review clauses would expect. A moveable rent review date, as contemplated by the third interpretation, although not unknown, was unusual in the context of commercial leases.

However, there were three important features of the case which distinguished it from the type of rent review clause with which the courts had become familiar in the last quarter of the twentieth century.

First, the rent review clause had not been entered into in the normal commercial context. The landlord was a charity and a registered social landlord and it was publicly funded.

Its tenants would be relatively poorly off individuals, no doubt normally with limited, if any, experience of interpreting legal documents.

In those circumstances it would be surprising, although of course by no means impossible, if it transpired that the first or second interpretation were correct.

One of the purposes of the 28-day notice was to enable a tenant unhappy with the increase to serve a 28-day notice to quit to end his tenancy: see section 5(1) of the Protection from Eviction Act 1977. That purpose would be nugatory if the rent could be increased retrospectively.

On the other hand, the notion of a moveable rent review date, whereby Riverside could increase the rent once at any time during a year from the first Monday in June, provided it first gave 28 days notice, appeared sensible and fair.

If Riverside did not serve the notice in early May, then the tenant had the benefit of a later review of the rent, but Riverside would not lose the right to review the rent altogether.

While Riverside would not lose the right to review the rent altogether, there would be no question of the tenant suffering liability for a retrospective increase in the rent.

Second, the level of reviewed rent was unaffected by the date from which it took effect.

The overwhelming majority of rent review clauses in commercial leases provided for the reviewed rent to be fixed by reference to values as at the date from which the reviewed rent was payable, namely, from the review date.

In the instant case, however, it seemed clear that if Riverside were to be able to delay the review date to some time after the first Monday in June, the basis upon which the delayed rent review would be assessed, in accordance with clause 2(8), would be precisely the same basis as if the review had taken effect from the first Monday in June, namely by reference to the increase in the cost of living over the calendar year preceding that first Monday in June.

Third, the drafting of the rent review provisions in the instant case was wholly different from that contained in any rent review clause which had, so far as his Lordship was aware, come before the court.

His Lordship considered that the combined effect of the centrally relevant clauses 2(6) and 2(7) meant that Riverside was entitled to increase the rent once a year on 28 days notice, which notice could take effect any time on or after the first Monday in June.

In that connection, clause 2(6) required Riverside to give the tenant four weeks notice before the reviewed rent became payable, and clause 2(7) provided that the reviewed rent could not become payable earlier than the first Monday in June.

The notion that the date on which a rent increase was to take effect did not have to be the first Monday in June was further reinforced by the fact that there was nothing in clause 2(6) to indicate that the four weeks notice referred to had to expire by any particular date.

Lord Hoffmann, Lord Rodger, Lord Brown and Lord Mance agreed.

Solicitors: Bremners, Liverpool; Stephensons, St Helens; Devonshires.

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