Rising rents
Riverside HA Ltd v White [2005] EWCA Civ 1385


In this case, the claimant housing association brought possession proceedings against the defendant assured tenants for rent arrears. The rent increase clause in the association's standard tenancy agreement allowed the association to increase the rent annually 'with effect from the first Monday of June each year'.


In fact, the association did not increase its rents each June. Instead of increasing its rents with effect from June 2000, the association effected the increase from April 2001. Although this increase was effected without formal variation of the tenancy agreement, it was done with the agreement of the tenants' association. Furthermore, the delay benefited the tenants as it amounted to a deferral of the increase that should have been made in June 2000. Rent increase notices were served in 2001 and in each subsequent year, stipulating a rent increase from the first Monday in April rather than in June.


The tenants argued that the rent as increased was not 'lawfully due' as it had not been validly increased in line with the rent increase clause. In the county court, relying on USC v Burnley BC [1978] AC 904, HL, the association successfully argued that the rent increases were valid because time was not of the essence in relation to the rent increase clause.


On appeal to the Court of Appeal, USC v Burnley BC was distinguished. That case established a rule of equity that distinguished between those terms of a contract providing for something to be done by a particular time, which were formal or non-essential, so that it would be inequitable for either party to insist on them as a bar to the other's rights, and those that were of the essence of the contract.


On construction of the tenancy agreement, there was no scope for applying the presumption that time was not of the essence. All the clause had done was to identify the rent review date. It contained no obligation on the association to do something by a relevant time and there was therefore no failure against which equity would relieve on the basis that the time provision was non-essential.


The association also ran a number of other arguments, the most significant of which was estoppel by convention. It was clear that all the elements of estoppel by convention were satisfied. Both parties had acted on the rent increase notices and assumed their validity, both had regulated their dealings accordingly, and the association would suffer detriment if the tenants were allowed to resile from this convention.


However, the court held that the association could not rely on the estoppel in its claim for possession as it would be using it as a 'sword not a shield'. Although the association had a cause of action for some arrears and possession that was not dependent on the validity of the rent increase notices, it was obliged to rely on the estoppel in claiming that the other arrears were lawfully due. However, if tenants of the association who had paid were to sue for recovery of the increased rent paid under the rent increase notices, they likewise would be unable to do so because the association would be able to rely on the estoppel by way of defence.


Notably, all members of the court expressed their regret in reaching this conclusion and, in giving the lead judgment, Sir Peter Gibson expressed the view that the existing state of the law of estoppel is unsatisfactory.



By Andrew Dymond, barrister, Arden Chambers, London