Landlord and tenant — Whether consent to assignment of a 99-years’ lease granted in 1965 was unreasonably withheld — Appeal from decision of Falconer J — Proposed assignee was an American attorney, resident in Washington, who did not intend to live in the subject flat, at least until his retirement, which was 20 years or more ahead — In the meantime he proposed to sublet the flat, which under the lease he could do with the lessors’ consent, not to be unreasonably withheld — Lessors objected to the proposed assignment on the ground that, with an absentee tenant, there was a prospect of a series of sublettings, which could give rise to problems — For example, occupation of the flat by young people on short tenancies whose habits and attitudes were different from the mainly middle-aged or elderly professional people in the other flats might cause friction — Tenant applied to the court for a declaration that consent to the assignment had been unreasonably withheld, but Falconer J decided that the lessors had not acted unreasonably — Tenant appealed — Court of Appeal, giving reasons for disagreeing with Falconer J, pointed out that, as the lease provided for subletting with consent, subletting as such could hardly be a valid ground for objection — As far as possible objection to particular types of subtenants was concerned, the lessors were in a position to consider whether it was reasonable to refuse consent when the time came — It would not be reasonable for a landlord, with wide powers to control future sublettings, to refuse consent to the assignment of a term for fear of the nature of such sublettings — The lessors would be able to refuse consent to undesirable subtenants or to subtenancies which would be detrimental to good estate management — Appeal allowed and declaration made that consent to the assignment had been unreasonably withheld
This was an
appeal by Nicholas Rayburn from a decision of Falconer J who had refused him a
declaration as plaintiff that his landlords, Mr and Mrs Wolf, had unreasonably
withheld consent to a proposed assignment of the appellant’s lease of a flat at
2A Gardnor Mansions, Church Road, Hampstead.
Edward Cohen
(instructed by Douglas Goldberg & Co) appeared on behalf of the appellant;
Robert Pryor QC and Edward Cole (instructed by Janners) represented the
respondents.
Giving the
first judgment at the invitation of Sir John Donaldson MR, BROWNE-WILKINSON LJ
said: In this case the plaintiff is the tenant of a flat, 2A Gardnor Mansions,
Church Road, Hampstead. It is common ground between the parties that that is a
high-class block of flats, most of which are personally occupied by the
tenants. The plaintiff holds the flat as assignee of a lease granted for a term
of 99 years from September 29 1965. He has entered into a contract to assign
that lease to an American attorney. The landlords, who are the defendants, Mr
and Mrs Wolf, acquired the reversion to the block and are also resident in it.
The terms of
the lease, so far as are relevant for present purposes, are set out in clause 2
of the lease, and in particular subclauses (17) and (18). Subclause (17) is a
covenant not to use the demised premises
for any
illegal or immoral purpose or for any trade business or occupation or knowingly
do or permit or suffer to be done . . . any act or thing which may in the opinion
of the Lessor be or grow to be or become a nuisance or annoyance to or to the
prejudice of the Lessor and its tenants or lessees of the remainder of the said
Building
and ends with
this positive covenant
that the
demised premises shall be kept and used as a high class private residential
flat in the occupation of one family or household only.
Subclause (18)
(i) is in these terms:
Not to assign
underlet consent to the assignment of or grant an underlease or part with the
possession of the Flat except as a whole and then only with the previous
written consent of the Lessor such consent not to be unreasonably withheld to
an assignment of the whole.
There are other
provisions dealing in detail with assignments and underlettings, in particular
requiring, in the case of an underlease or assignment, the tenant to obtain a
covenant directly with the lessor to pay the service charge which is provided
for, and, in the case of an assignee, a direct covenant to pay the rent. There
are provisions requiring that any underlease shall not be at an annual rent
less than the rent of the head lease, restricting the ability of an underlessee
to take rent more than one quarter in advance, and other provisions regulating
underleases and subunderleases.
The plaintiff,
in addition to agreeing to sell the term granted by that lease, has entered
into a contract to buy another house.
The proposed
assignee is an American attorney, married with children, and resident in
Washington in the United States. It is not his intention to live in the flat.
He intends to remain living in the United States at least until his retirement,
when he might take up personal occupation of the flat, but that will not be for
some 20 years or more. It is his intention in the meantime to sublet the flat.
It is that factor which raises the difficulty in this case.
The
defendants, as landlords, object to the assignment because they say that, given
the proposed assignee’s absence from this country and lack of intention to live
here, and his avowed intention to let the flat in the meantime, they are facing
the prospect of a series of underleases, which they anticipate may, and
probably will, be for short terms. Mrs Wolf in her affidavit deposes to the
fact that her experience in managing this block has been that such underleases
give rise to problems; that in the past they have on occasions given consent to
underleases during the temporary absence abroad of various tenants; that it is
on the whole young people who are interested in taking short leases at rack rents;
that their habits and attitudes are not the same as those of the majority of
the residents of the block, who are middle-aged or elderly professional people,
which has given rise to friction; and that there have been difficulties, given
that the flat is occupied by an underlessee, in ensuring that the head tenant
controls the way in which the flat is temporarily being occupied by the
underlessee. All that, Mrs Wolf says, gives rise to a reasonable apprehension
in the minds of the landlords that by permitting this assignment to the
American attorney, as an absentee non-occupant of the flat, problems of
management in the future and problems with the existing tenants of the block
are likely to arise. It is on those grounds that the landlords have refused their
consent to assign.
The plaintiff
started proceedings for a declaration that consent to the assignment of the
term had been unreasonably refused. The matter came before Falconer J, sitting
in the Chancery Division, on March 12 of this year. He held that the defendants
were not acting unreasonably. The plaintiff appeals to this court against that
decision.
The basic
approach in law is not really in issue between the parties. It is accepted that
the burden is on the tenant to prove that the landlord is unreasonably
withholding or refusing consent and that the landlord, in deciding whether or
not to refuse consent, is entitled to consult his own interests and is not to
be held unreasonable even if a different landlord might have taken a different
view. In reaching his conclusion as to whether to give consent or not the
landlord is entitled to take into account good estate management so long as he
is not trying to extract an uncovenanted benefit such as to secure a surrender
of the term.
On that basis,
Mr Pryor for the landlords says that, on the evidence of Mrs Wolf, she has
taken a view as to what is sound management of this block; that her
unchallenged evidence is that there have been problems with underlettings in
the past; and that a prudent landlord, having regard to his own interests and
the good management of the block, is entitled to take all those matters into
account.
For myself I
am not able to accept that approach on the facts of this case. Effectively, the
ground for objection put forward by the landlords is that there will, or may
be, a series of subtenants in the future whose presence in the block is going
to give rise in the future to practical problems. But it is quite clear that
the lease itself envisages not only assignments but also underleases; therefore
it is plainly within the purview of this lease that there were to be
underleases. So the mere possibility of an underlease being granted by a
proposed assignee (being something anticipated by the headlease itself) cannot
be a ground for objection.
Then it is
said that the objection is not to the underlease as such but to the type of
underleases that are to be anticipated. But in my judgment that is not a
legitimate ground in the context of this lease. If in the future the assignee
of the term were to put forward proposed underlessees, the freeholders will
have complete freedom to decide whether or not it is reasonable to refuse their
consent to such underletting. The matters which are now being put forward by
the defendants as grounds for refusing any assignment of this long term may be
directly relevant when the lessors come to consider the proposal to grant any
specific underlease. For myself I am not unsympathetic to the point of view
which says that there are difficulties in multiple occupation and matters of
that kind, which may well make it reasonable when any specific underletting is
put forward for the freeholders to impose very stringent conditions on the
terms of the underletting and, indeed, as to the personality of the
undertenant. But, in my judgment, it cannot be reasonable for a landlord, who
under the terms of a long lease has the widest powers to control future
underlettings, to say that it is impossible to agree to any assignment of the
term as a whole for fear of the nature of those future underlettings. If the
assignment goes ahead, the protection which the landlords will have in the
future remains exactly the same as it is at present. They will have the right
to refuse consent to undesirable subtenants or subtenancies of a nature which
are undesirable in the interests of good estate management. It is not
reasonable for them now, looking to the future, to refuse to agree to any
assignment of the term because they fear that there may be applications for
subtenancies of a kind which in the future they would not wish to agree to and
which, under the lease, they would have power not to agree to.
For those
reasons I am unable to agree with the decision of the learned judge. I would
allow this appeal and make a declaration that consent has been unreasonably
withheld.
SIR DONALDSON
MR and MUSTILL LJ agreed and did not add anything.
The appeal
was allowed with costs in the Court of Appeal, and costs below only after March
5 1985.
