Tenants’ circumstances change. Sometimes this means that a tenant will want permission to assign their lease. When can a landlord reasonably refuse a tenant’s request?
This was the question before the court in No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd  EWHC 2438 (Ch). The court held that one of the three conditions for assignment set by West India (the Landlord) was so unreasonable that the Landlord had breached its obligations to East Tower (the Tenant) under the Landlord and Tenant Act 1988.
Facts of the case
The Tenant was the lessee of several apartments in a building owned by the Landlord in Canary Wharf. The Tenant decided to sell its apartments. Under the terms of the lease, the Tenant was required to obtain the consent of the Landlord to any assignment. The Landlord was not to unreasonably withhold its consent.
The Landlord granted consent to a number of the Tenant’s requests for sales. However, relations between the Landlord and the Tenant soured. When the Tenant applied for consent to assign the lease of two additional apartments, the Landlord set the following three conditions for assignment, the Tenant must:
- pay an assignment consideration fee of £1600 plus VAT;
- pay an apartment inspection fee and allow the apartments to be inspected; and
- provide bank references from any potential assignees.
After a failure to agree, the Landlord refused to grant consent.
Burden is on Landlord to show refusal is reasonable
The Act requires landlords to grant consent within a reasonable period of time once requested. Crucially, the Act places the burden of proof on the landlord to show the reasonableness of any refusal to grant consent. But how reasonable does a landlord have to be?
This is not an easy question. For the court of first instance, the request for bank references was unreasonable in view of, amongst other things, the high price to be paid by the assignees for the apartments being indicative of their financial position. However, the court of appeal disagreed. The request for bank details could be justified given the level of likely service charges. The court also held that the Landlord had a right to inspect the property and the Tenant had undertaken to pay the Landlord’s fees connected to a consent application.
For the court of appeal, the main issue was the Landlord’s request for payment of a £1600 fee to even consider the application. This was so unreasonable as to override the other two, potentially reasonable, conditions. As the court of first instance had assessed, a fee of £350 might have been more accurate.
Common sense prevails
This case makes it clear that if there are expenses involved in any potential assignment and the landlord states that reimbursement is a precondition for the assignment, then these should be genuine and clearly quantifiable. Disingenuous charges, for example, a charge set to merely consider an assignment application, will likely be considered unreasonable by the courts. Common sense prevails.
Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.
More Commercial Property Articles
The government is keen to afford residential tenants greater security and the increasing obstacles to service of a Section 21 Notice appear directed at this. There is now a consultation upon removing the blanket [...]
Anybody entrusted with selling property on the behalf of a lender can take comfort in the robust approach shown by the Court.
It is always preferable for leases to contain express reservations to alter, build and erect scaffolding in favour of a landlord who might want to develop at some point in the future.
When opposing the grant of a new tenancy, the Supreme Court has introduced an additional “acid test” for landlords in relation to reconstruction work as a reason to oppose the grant of a new tenancy. [...]
A Court of Appeal decision serves as a warning to developers of the dangers of proceeding with developments in breach of a restrictive covenant.
The Supreme Court held that the landlord’s intention to demolish or reconstruct must be independent of the tenant’s claim for a new tenancy and not conditional upon it.
In new leases, it will be prudent for landlords to ensure that any enforcement covenants are qualified by a reasonableness requirement, as determined by the landlord.
Speedier Alternative to the County Court Bailiffs: there is an alternative and frequently quicker route once a County Court Possession Order has been obtained.
A landmark case has clarified the scope of an action for nuisance based on the presence of Japanese knotweed.
A landlord is no longer be able to serve a Section 21 Notice at the start of the tenancy requiring the tenant to leave at the end. Of even greater concern are the retaliatory [...]