Real Estate Tip of the Week: Know your prejudice - DAC Beachcroft

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Real Estate Tip of the Week: Know your prejudice

Published On: 3 October 2016

When negotiating a rent review, frequently offer letters are written as being 'without prejudice'. But what are they without prejudice to?

Communications labelled 'without prejudice' enable parties to discuss freely the terms of a rent review without the risk of those terms being disclosed to an expert or arbitrator at a later date. Parties can, therefore, argue for a completely different rental figure when a review is referred to an expert or arbitrator. However, to qualify as a valid without prejudice communication, there must be a dispute and the communications must relate to a genuine attempt to settle it.

Heading rent review communications as being 'without prejudice' does not prevent a binding contract from being created. For example, if a landlord offers to settle a rent review at £30,000 p.a. and the tenant counter-offers at £25,000 p.a., neither offer can be used as evidence before an expert or arbitrator if the communications are both expressed as being 'without prejudice'. However, if the landlord offers to settle the review at £30,000 p.a. and the offer is accepted by the tenant, or the landlord accepts the tenant's counter-offer of £25,000 p.a. that acceptance is binding under the general principles of contract law even if all the communications are expressed to be 'without prejudice'. The fact that the communication is marked 'without prejudice' rather than being an open communication is irrelevant and the landlord cannot withdraw a without prejudice offer after it has been accepted by the tenant or withdraw its own acceptance of the tenant's offer.

Be aware that marking a communication 'without prejudice' doesn't mean you can't be bound by it so be careful not to prejudice your position unintentionally.