What is rent?

Rent is a fundamental concept for landlord and tenant law. It governs whether leases fall within various schemes for security of tenure, and is often the simplest route for forfeiture. It also attracts its own limitation period and is the only type of debt which can be subject to Commercial Rent Arrears Recovery (CRAR).

Historically, rent could consist of money or services. This gave way into the modern era to a sum of money payable under contract: United Scientific Holdings v Burnley Borough Council [1978] AC 904 (HL) at (935) per Lord Diplock. In that case it was said that the ‘only surviving relic’ of that mediaeval understanding was the remedy of distress for arrears.

This was taken further in Escalus Properties Ltd v Robinson [1996] QB 231 (CA) where Nourse LJ at (243)-(244) set out the four requirements of rent:

• a periodical sum,
• paid in return for the occupation of land,
• issuing out of the land,
• for non-payment of which a distress is leviable

This would seem clear, but it has two problems.

The first comes from Escalus Properties itself. The case concerned whether service charges, described in the lease as deemed to be additional rent and recoverable as such, actually were rent despite not having been reserved in the reddendum. The case found that they were. In that case, the definition of rent was truly whatever the lease said would be treated as rent. It cannot be right either that the service charges were paid in return for occupation of the land, as they were specifically the costs of services provided rather than a charge for possession. Nourse LJ’s second point was undermined by his ratio.

The second is newer, and is that distress no longer exists. It was abolished by section 71 Tribunals, Courts and Enforcement Act 2007. CRAR replaced it in relation to business tenancies and applies only to rent as defined in section 76 of that Act, and subsection (2) in particular cuts against the thrust of Escalus Properties:

(2)         “Rent” does not include any sum in respect of rates, council tax, services, repairs, maintenance, insurance or other ancillary matters (whether or not called “rent” in the lease).

That is again a restrictive meaning of rent, that would prevent reservation of service charges or insurance premia.

Escalus Properties included the ability to distrain as a component of rent, so should its meaning now be tied to the definition for CRAR? The short answer is no. The definition in section 76 does not apply to section 85 of that Act. Section 85 invalidates contractual provisions for distress in relation to various sums, one of which is rent. If the definition in the Act does not apply to at least that reference to rent, then it must have a different meaning. A circular meaning that rent is defined by reference to CRAR would be absurd for that section. Another reason to avoid CRAR is that it of course does not apply to residential property, and a two-tier system of what is and is not rent would be a strange thing to introduce by accident.

So where does this leave the basic meaning of rent? The answer lies in looking past the four requirements set out by Nourse LJ in Escalus Properties, and turning instead to the decision of – who else? – Lord Denning MR in CH Bailey Ltd v Memorial Enterprises Ltd [1974] 1 WLR 728 (CA). At (732) he set out the main principle clearly, which found its way into the ratio of Escalus Properties and of United Scientific Holdings:

‘The time and manner of the payment is to be ascertained according to the true construction of the contract, and not by reference to out-dated relics of medieval law.’

Rent has a long history, but in the modern era it is routinely treated as a matter of contract, and the parties are allowed to cast its meaning as broadly or narrowly as they choose.