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04/09/2017

No Time to Lose: How Time Can Affect Property Arrangements

Time can fool us. We are often up against it, running out of it, racing against the clock, trying to avoid crunch time. Time can be a thief – both of rights and money – but there are ways of making sure you are not a victim.

Many property documents specify timescales by which certain actions are to be taken or by which certain rights are to be exercised, failing which such rights may be lost. So typically:

  • A contract for the sale of land specifies a completion date.
  • Leases are usually granted for a fixed period. They often contain break clauses entitling a tenant and/or a landlord to determine the lease early on the service of a prior notice.
  • Leases often also contain timescales for the operation of rent review provisions.
  • A conditional contract will specify the length of the conditional period (and possible extensions to it). A typical contract in a development context will be conditional on a planning permission being obtained with the specified period. There will be many timescales involved, such as the time by which a planning application is to be made (e.g. "as soon as reasonably practicable" or "in any event within 6 months of the date of this agreement").
  • Similarly, an option agreement will specify the length of the option period and possible extensions to it so that there is a clear deadline by which a notice exercising is to be served.
  • Many property contracts (such as leases, options and conditional contracts) contain other "time" provisions.  For instance, there may be a clause requiring a party to give its approval or otherwise to a proposal made by the other party within x working days. There are often "deeming" provisions so that any failure to respond means that the party whose approval was sought is deemed to have given its approval in any event.

In the euphoria and relief brought about by completing a deal, it is all too easy to move onto the next thing. It is, however, important that you continue to keep an eye on time critical dates arising from that deal and, when taking action, interpret timescales correctly.

The way the relevant document is drafted and the expressions it uses can make a difference:

  • “Days” are not the same as "working days" (and even a “year”, a “week” or a “month” can have unexpected meanings in very specialist cases)
  • Does a “day” end at the end of working hours or at midnight?
  • "From" a certain date is not the same as "from and including" a certain date
  • Reference to a quarter day usually means one of 25 March,  24 June,  29 September or 25 December during the year but this is not always the case (especially where dealing with agricultural land)
  • Months can be problematical. Where a contract provides for something to happen within a certain number of months, the period expires on the day of the month bearing the same number as the date on which the period begins. So what about three months’ notice served on 30 November? When does the notice expire, bearing in mind that February is a short month?
  • Another example of problematical months is demonstrated by the important case of Mannai[1]. Under a lease granted for 10 years "from and including 13 January 1992" the tenant was entitled to exercise a break clause "by serving not less than six months’ notice in writing… such notice to expire on the third anniversary of the term commencement date".  The tenant served a notice specifying 12 January 1995 as the termination date, whereas the correct termination date was 13 January 1995 (there was no requirement in the lease for the break notice to specify the termination date). As it happens, the judgement in the case allowed the tenant’s notice to stand because it adequately communicated the meaning of the notice, i.e. the tenant's intention to determine the lease by exercising its right to do so  - but it must have been a nerve-wracking time before the Court of Appeal issued its judgement.

Whatever words or expressions are used, consideration must also be given as to whether or not “time is of the essence”. A time of the essence provision is express or implicit in many – but not all – property arrangements. In a 2001 case[2], Lord Nicholls of Birkenhead said:

“Inherent in a time limit is the notion that the parties are drawing a line. Once the line is crossed, a miss is as good as a mile."

This neatly sums up the meaning of “time is of the essence”. Time is of the essence in conditional contracts and option agreements, as well as under a completion notice served by a seller on a defaulting buyer who has failed to complete on the due date. Failure to meet the deadline can have dire consequences.

That said, equity still intervenes in some cases. Here is Lord Nicholls of Birkenhead again in the same 2001 case:

"The rigour of this principle is softened when the parties are taken to have intended otherwise".  

So, for instance, timescales about operating rent reviews are seldom "of the essence" nowadays – especially after the key United Scientific[3] case -  although you should never rely on this: it depends on the construction of the wording.

There are also practical considerations to bear in mind. Notice periods may expire at the weekend or during the festive break at the end of the year. Similarly, certain actions may have to be taken during holiday periods.

To avoid increasing stress levels (or even worse repercussions), the key points are to:

  • Identify key dates now, consulting your solicitor if you are unsure as to the precise dates
  • Diarise key dates, including advance diary entries alerting you to consider preparing for the action needed
  • Share those diary entries with your colleagues (you may not be available on the day when action is needed)
  • Consult your solicitor – in good time – before any action is needed. It is recommended that you also seek advice as to whether or not any notice you may be considering meets the requirements of the relevant contract, option or lease (there are many horror stories about last-minute notices being served which turn out to be invalid, with there being no chance to serve a correct, valid notice).

To adapt from a Dr Seuss poem: don’t let it get too late too soon.

If you would like further advice or have any questions, please contact Alice Liddle (alice.liddle@howespercival.com).

© Howes Percival LLP



[1] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749

[2] Valentines Property Ltd v Huntco Corp Ltd [2001] N.Z.L.R 305

[3] United Scientific Holdings Ltd v Burnley BC  [1978] AC 904