For consents to alterations see the Alterations page.
Assignment
A landlord imposing a condition can only rely upon written reasons given within a reasonable time of receiving T's application and within a reasonable time of imposing the condition. The question of reasonableness is determined by the information available to L at the time he imposed the condition. Landlord unreasonably requested the provision of a surety without giving any reasons and even though there was nothing wrong with the financial information provided.
London & Argyll Developments Ltd v Mount Cook Land Ltd [2002] 50 EG 111 (ChD).
Once L has given written notice with reasons refusing consent the period of reasonable time for giving consent (required by s1(3) of the Landlord and Tenant Act 1988) has passed. L cannot subsequently change his mind and say that the change has occurred within a reasonable time of the request. The fact that there were subsequent attempts to negotiate permission to assign did not deprive T on the facts to its rights under the 1988 Act."The expression 'within a reasonable time' may have entitled the landlords to a longer period in which to serve the notice than in fact they chose to take. Having chosen to serve a notice, however, they cannot subsequently be allowed to say, because they could have taken more time, that their refusal was ineffective as a refusal under the section. The purpose of written statutory notices such as those required by section 1(3) is to ensure that each party knows where the other stands and the refusal must be treated as such." (Pill LJ at para 80). Go West Ltd v Spigarolo [2003] EWCA Civ 17; 07 EG 136; [2003] 2 WLR 986; [2003] 2 All ER 141.
Articles:It stands to reason by Julia Goldberg, Norton Rose A fairly detailed look at the law on unreasonable refusal to consent. (Estates Gazette, 9 November 2002, p149).
To consent or not to consent? That is the question by Janet Bignall and Martin Dray (NLJ, 25 October 2002).
"No guaranteed answer" by Sandi Murdoch - Comment on two cases where the landlords insisted upon sureties (Estates Gazette, 8 February 2003, p143)
"To quick off the mark" by Sandi Murdoch - Explanation of Go West Ltd v Spigarolo (Estates Gazette, 15 March 2003, p151).
"Property Law Update" by Emily Windsor - Further explanation of Go West (New Law Journal, 7 March 2003, p348).
Breach of covenant as reason for refusal
Landlords often think that they can refuse to give consent to an assignment on the ground that the intended use by the assignee would be a breach of covenant. They used to be wrong. The view taken by the courts was that as the landlord will have the same rights against the assignee as he has against the tenant he would not be prejudiced (Killick v Second Covent Garden Property Co. Ltd [1973] 2 All ER 237, CA). However, the House of Lords has now overruled Killick and held that a refusal in these circumstances is not automatically unreasonable. Instead one must ask what the reasonable landlord would do in the particular circumstances of the case. The court cannot and should not formulate strict rules as to how a landlord should exercise his power of refusal.
Ashworth Frazer Ltd v Gloucester City Council (No.2)[2001] UKHL 59: [2002] 05 EG 133.
Consent by letter subject to licence
The landlords consent may be sufficiently proved to the proposed assignee for the purposes of condition 8.3.4 of the Standard Conditions of Sale, 3rd edition, by documents other than a formal licence to assign. The consent was clearly contained in the correspondence that had been given to the proposed assignee. The heading subject to licence did not prevent it from being the granting of consent.Auld LJ: "In my view, the landlords solicitors heading of a number of their letters 'Subject to Licence', coupled with a statement of conditions, did not qualify the plain indication of consent in the body of the letters so as to make it equivocal or uncertain" (para 43).
Ward LJ: "With these contextual points in mind I turn back to condition 8.3.4. When and how is consent given for the purposes of that condition? It cannot sensibly be when a formal licence deed is handed over on completion, for reasons fully analysed in paragraph 33 of Auld LJs judgment. At any rate since the coming into force of the 1988 Act consent is given, in my view, when the landlords decision in principle is communicated to the tenant by the landlord himself, or by the landlords solicitors or other agents (no one has suggested that the landlords solicitors did not have actual authority to communicate the decision in principle). A decision in principle can be a sufficient decision for the purposes of s.1(3) of the 1988 Act, and in my judgment it clearly was in this case." (Paras 99 and 100). Aubergine Enterprises Ltd v Lakewood International Ltd [2002] EWCA Civ 177; [2002] 1 WLR 2149.
Article: "Subject to licence" by Michael Draper, Lancashire Law School - (Solicitors Journal, 26 July 2002, page 678).
Considering the application and requesting information
Article: "Landlord and Tenant Act 1988 - Written Consents and Requests for Information" by Mark Warwick, barrister - Discusses the degree of detail required in a landlord's decision letter and related matters (Landlord and Tenant Review, (2003) vol.7, issue 1, p6).
Drafting licences to assign
Article: "A licence to print money" by Keith Miller, Joelson Wilson & Co - Suggests that Messrs Big and co. make too much of a business of licences to assign, which could be much simpler documents. Some typical clauses discussed. (Estates Gazette, 12 April 2003, p132). See also the Aubergine case.
Guarantor
A requirement for a prospective assignee to offer a guarantor of its covenants is often included in a lease as an absolute requirement in what is otherwise a fully qualified alienation covenant. There is no implied term that the landlord will act reasonably in requesting a guarantor. The most that can be said is that there is an implied term that any request for guarantors must be genuinely for the purpose of improving the landlords financial security
Mount Eden v Towerstone [2002] 31 EG 97; [2003] L&TR 4
Underletting
Difficult landlord
Let this case be a warning to any landlord who thinks he might like to make life difficult for a tenant seeking to assign or underlet. The proposed assignee was clearly suitable. After a reasonable time had passed for making a decision Ls advisors made increasingly unreasonable demands on T and even went on to write an outrageous letter in which they accused T of a long delay in furnishing replies. The reason why no decision was given was because [L] through its agents was pursuing a deliberately obstructive policy designed to prevent assignment going through. The reason for doing this was that L thought that if the assignment could be prevented it would be able to negotiate a surrender with a nil premium because of the difficult situation that T would then be in. Peter Smith J awarded 25,000 exemplary damages on top of his award for damages under the Landlord and Tenant Act 1988 (which included damages for loss of the premium of 75,000 that it would have got from the assignee, and a sum for loss of goodwill and turnover). It seems to me that it is important to mark the courts disapproval by a sum which will cause the Defendant to consider seriously its future conduct. The sum should not be excessive; it should be moderate. Moderate however, is to be assessed on the overall facts of the case and in the light of the conduct and the need to mark disapproval. It is important for landlords to appreciate that they should not resort to tactics to frustrate legitimate expectation of tenants by raising long and irrelevant queries designed to avoid giving the answer to the application for a licence to assign. This is the more so when the conduct is calculated to achieve an extraneous benefit for itself at the expense of the tenant. (para 150). Design Progression Ltd v Thurloe Properties Ltd [2004] EWHC 324
Articles:
Time to wake up by Suzanne Gill Discussion of landlords requirement to consent within a reasonable time in the light of Design Progression Ltd v Thurloe Properties Ltd [2004] EWHC 324 in which the judge slated the landlords behaviour. (Estates Gazette, 10 April 2004, p101).
A tactical backfire by Sandi Murdoch Another article on the case. (Estates Gazette, 1 May 2004, p99).
Lower rent on underlease
It is a common situation. The tenant wants to sublet. His lease allows him to do so but contains a proviso that the rent must not be less than the full market rent. However, he cannot find a sub-tenant willing to pay that much so the tenant agrees to grant a sub-lease at a full rent but in a side agreement agrees to accept less. That is what was proposed in this case but the landlord, who knew of the arrangement, refused to grant consent to the sub-letting. The tenant argued that he was being unreasonable.
The key facts:There were five-yearly upwards only rent reviews in the head lease.
The covenant not to sublet without consent was subject to provisos (i) that any underlease would not reserve a rent less than the full market rent reasonably obtainable without taking a premium and (ii) the rent payable by the underlessee would be reviewed on an upwards only basis on the same dates as the headlease to the intent that a market rent would be obtained.
The heads of terms in respect of the proposed underlease provided for a fixed rent after 2005.
In the proposed collateral deed between T and the sub-tenant, T was going to give an indemnity in respect of the difference in rent payable between the underlease and the heads of terms.
Held (CA): The sub-lease and collateral agreement had to be considered together and that as such they did not comply with the provisos in the head lease (applying Bocardo SA v S&M Hotels Ltd [1979] 3 All ER 739). The question of reasonableness did not even arise. It made no difference that the collateral deed was expressed to be personal to L and T. There were many circumstances in which L might be affected by the underlease, e.g. the rent under the underlease would be relevant on any rent review under the headlease. An underlessee might acquire a new underlease pursuant to the provisions of Part II of the 1954 Act and if so there was a risk that the terms of that tenancy could subsequently become the terms of a tenancy arising directly between the landlord and the underlessee upon termination of the headlease.
(The House of Lords refused permission to appeal)
Homebase Ltd v Allied Dunbar Assurance plc [2002] EWCA Civ 666; [2002] L&TR 27; [2002] 27 EG 144; [2003] 1 P&CR 6
Articles:No red card for refusal by Sandi Murdoch Considers and compares Allied Dunbar and Clinton Cards (Estates Gazette, 21 September 2002, p203).
Sideways look" by Beverley Vara and Celyn Armstrong, Allen & Overy - Considers Allied Dunbar (Estates Gazette, 4 January 2002, p62).
"A do-it-yourself solution" by Nicholas Shepherd, Shoosmiths - Suggests a possible solution for getting round Allied Dunbar. (Estates Gazette, 8 March 2003, p159.
Claim by T for damages under s4 of the Landlord and Tenant Act 1988. The lease reserved an annual "basic rent" of 95,000. T covenanted not to sublet at a sum below the basic rent without L's consent, which was not to be unreasonably withheld "if the proposed rent is the full rack rental reasonably available on the open market". There was also a covenant against change of user without consent, not to be unreasonably withheld. T found a potential sub-tenant, which would involve a change of use, at a rent of 75,000. L refused consent. The court held that the basic rent restriction was a qualified covenant to which the Act applied and that L had been unreasonable. The expert evidence established that 75,000 was at the relevant time the best rent reasonably obtainable in the market. However, T lost the claim on a causation point; i.e. that L would have objected anyway to the change of user, in respect of which there could be no claim under the 1988 Act.
Clinton Cards (Essex) Ltd v Sun Alliance & London Assurance Co Ltd [2002] EWHC 1576; [2002] 37 EG 154; [2003] L&TR 2.
What is the rent on the underlease? - Service of the request
Claim for damages by T against L under the Landlord and Tenant Act 1988. L had refused to consent to Ts request to consent to an underletting. T argued that the refusal had been unreasonable. The lease contained a proviso that the rent to be reserved by the underlease should be a full-rack rent. In its application for consent T had failed to tell L what the rent had been. In its defence L argued that on a true construction of the proviso this made the request for consent ineffective.
Held: The point was unarguable and this element of the defence was struck out. There was no need to imply a term into the proviso that the letter should state the rent; if L had wanted to know he could have asked.
(There was a second point: L argued that T had failed to comply with section 5(2) of the Landlord and Tenant Act 1988, as to service, because the request for consent was served on Ls solicitor. The judge refused to strike out this aspect of the defence. The point was not bound to fail).
Norwich Union Linked Life Assurance Limited v Mercantile Credit Co Limited [2003] EWHC 3064 (Ch); [2004] 04 EG 109 (CS)
Article: A valid application by Sandi Murdoch A comment on Norwich Union v Mercantile Credit. Picks up in particular on the point that service of the request for consent on an agent without authority (in this case a solicitor) is not sufficient for the purposes of s5(2) of the 1988 Act and s23 of the 1927 Act. (Estates Gazette, 21 February 2004, p133).
Underletting to be at market rent - reverse premium? - Delay
There are here two cases that were part of one on-going dispute:
First case: The lease required any sub-lease to be granted at a market rent. The proposed sub-lease was at a market rent but in order to induce the sub-tenant to take the lease the tenant offered a reverse premium. L refused consent claiming that the reverse premium constituted a breach of the lease.
Held: The premium was not a breach of the lease. The fact that the inducement was required to get the sub-tenant to enter into the lease did not mean that it would not be paying a market rent.
NCR Ltd v Riverland Portfolio No 1 Ltd [2004] 16 EG 110.
Second case: Covenant not to sublet without consent not to be unreasonably withheld. L refused to consent to Ts proposed subletting. T made two complaints: (i) that there had been an unreasonable delay and (ii) that the refusal was unreasonable. The judge found in favour of T but his decision was overturned in the CA. The case contains a useful summary of the law (paragraph 11 of the judgment) but otherwise essentially turns upon its own facts and the evidence, including expert evidence, before it.
The main question was the reasonableness of the decision to refuse consent. The judge had found in favour of T and the CA found that he was wrong to do so. The fact that the head tenant continued to be liable under the lease was not a reason for ignoring the covenant strength of the proposed sub-tenant.
On the question of the reasonableness of the time taken to give a decision the judge considered that a period of two weeks was sufficient time for a decision once all the relevant information was available. This was criticised by Carnwarth LJ in the CA, para 21: In my view, whatever earlier discussions there had been, Riverland was entitled to adequate time following receipt of the completed application to consider the serious financial and legal implications of a refusal with its advisers, and if necessary to report to the relevant Board. In the absence of special exceptional circumstances, a period of less than three weeks (particularly in the holiday period) cannot in my view be categorised as inherently unreasonable for that process.. NCR Ltd v Riverland Portfolio No 1 Ltd (No 2) [2005] EWCA Civ 312; [2005] 22 EG 134.
Article: Reversing the trend by Sandi Murdoch Points out how in NCR Ltd v Riverland Portfolio No 1 Ltd [2004] EWHC 921 (the first case) the tenant and sub-tenant used a reverse premium to get round the problem of the landlord forbidding sublettings below the initial rent when the market has declined, highlighted by Allied Dunbar v Homebase [2002] EWCA Civ 6666. (Estates Gazette, 25 September 2004, p133).
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