A recent appeal found that as long as a landlord gives one reasonable reason for refusing consent to a tenant’s application to assign a lease, it doesn't matter if they have also listed other reasons which are unreasonable as their basis for withholding consent.

A recent appeal found that as long as a landlord gives one reasonable reason for refusing consent to a tenant’s application to assign a lease, it doesn't matter if they have also listed other reasons which are unreasonable as their basis for withholding consent.

In No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd, the High Court had previously found that the Landlord’s decision to withhold consent was unreasonable because one of the three reasons that they had given was held to be unreasonable.  The Landlord had cited the following three reasons for their refusal:

  1. the Tenant had refused to give an undertaking to be responsible for the Landlord’s costs of £1600 plus VAT, made up of legal fees of £1250 and £350 of surveyors’ fees;
  2. the Tenant had refused to pay a fee to cover the cost of an inspection of the Property to establish whether they had breached any covenants in the lease;
  3. the Tenant had refused to provide a bank reference to enable the Landlord to assess its covenant strength.

The Tenant claimed that all three grounds were unreasonable and the County Court agreed. The High Court found only the cost of the licence to assign to be unreasonable but concluded that the inclusion of this unreasonable ground meant that the Landlord had unreasonably withheld consent to assign.

The Landlord took the case to the Court of Appeal who took a different approach. They looked at the decision as a whole instead of breaking it down into separate reasons and found that as the Landlord had cited two reasonable grounds the inclusion of one unreasonable ground would not invalidate the decision as a whole, as it would not have affected the outcome.  This would seem to be a much more common-sense approach.

This case is important as it reminds us of the need for a Landlord to give clear, justifiable reasons for any decision, which must also be given within a reasonable timeframe.  However, it has also created the surprising position that the situation for withholding consent is now exactly the opposite to that if granting consent subject to conditions, which is governed by statute.  The latter is much more risky, as if any one condition is unreasonable the landlord will be deemed to have withheld consent unreasonably regardless of the nature of the other conditions.  It is therefore safer for landlords to withhold consent and cite multiple conditions in the hope that one would be upheld by a court than to try to accommodate the tenant and grant consent subject to one or more provisos!

If you need advice on dealing with an application for consent, or to apply yourself, our experienced Commercial Property team would be happy to help.  Please do not hesitate to contact us on 0161 941 4000 or email us at lawyers@myerson.co.uk.

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