Landlord's consent to assign - the landlord's decision must be reasonable, but not necessarily all the reasons
Landlords considering tenant applications for consent to assign, underlet, charge or part with possession are generally subject to duties under the Landlord and Tenant Act 1988:
- to give consent, except where it is reasonable not to do so;
- to give consent within a reasonable time;
- to give written notice of their decision;
- to pass on applications for consent to appropriate people.
In brief, these duties apply where the lease includes a covenant by the tenant not to assign (or underlet, charge or part with possession) without the consent of the landlord and that consent is not to be unreasonably withheld. If a dispute goes to court, the persons subject to these duties have the burden of showing that they have complied.
In the recent No.1 West India Quay (Residential) Ltd case, the High Court held that because one of the three reasons given by the landlord for refusing its tenant consent to assign was unreasonable, the landlord had unreasonably withheld consent.
However, the Court of Appeal has disagreed, issuing a judgment stating that the question for the courts is whether the decision to refuse consent was reasonable; not whether all the reasons for the decision were reasonable.
The Court of Appeal gave the example of a tenant requesting consent to assign a lease with a high annual rent. The landlord requires the tenant to pay its costs of, for example, £1,000 when a reasonable sum would be £750. However, the landlord also objects on well-reasoned and compelling grounds that the proposed assignee would be unable to pay the rent. The Court of Appeal stated that it would be a draconian sanction if the landlord could be required to accept a tenant with low covenant strength simply because it had demanded £250 too much in the way of costs.
This decision will come as a relief for landlords, but will be less welcome to tenants who may have hoped to benefit where their landlord has provided unreasonable, as well as reasonable, reasons for withholding consent.
Case - No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250 - http://www.bailii.org/ew/cases/EWCA/Civ/2018/250.html
This information is necessarily brief and is not intended to be an exhaustive statement of the law. It is essential that professional advice is sought before any decision is taken.
Helen Wheddon