Commercial lease — Subletting Failure of defendant landlord to give consent — Late request for undertaking from claimant head tenant — Whether request unreasonable — Claim allowed
The defendant was the landlord and the claimant was the head tenant under a long lease of commercial premises. The claimant was a subsidiary of a large bank, which had guaranteed its liabilities under the lease. The lease contained a covenant against making alterations or additions without the landlord’s written consent and required the payment to the landlord of any architect’s and surveyor’s fees incurred in connection with an application for a licence. Written consent was also required for any assignment or subletting, which was not to be unreasonably withheld in the case of an assignment or subletting at a full rent without premium.
The claimant wrote to the defendant, seeking consent to a subletting, enclosing financial information about the proposed subtenant and requesting confirmation as to any necessary undertakings. The defendant asked for references from a bank and the sublessee’s previous landlord, plus one professional and two trade references. Almost six weeks after the original request for consent, the defendant demanded, as a condition of consent, that the claimant give an undertaking to pay the legal costs and disbursements of the subletting. By that time, the landlord reference had been supplied, and the bank reference followed, although the other references had not been sent. The claimant then notified the defendant that alterations were being proposed to the property.
The claimant subsequently granted the sublease, despite the fact that no formal consent had been given, and gave an undertaking as to the reasonable and proper legal and surveyor’s costs. Following further correspondence, the claimant sent a cheque in respect of costs incurred to that date. It declined to give a further undertaking requested by the defendant in connection with the grant of a licence for the alterations.
The claimant brought proceedings in which it contended that the defendant was unreasonably withholding its consent to the subletting, contrary to section 1(3) of the Landlord and Tenant Act 1988.
Held: The claim was allowed.
Although the requirement for a landlord and bank reference had been reasonable, the defendant’s request for five references was unreasonable, given the background to the matter, the terms of the lease, and the quality of the head tenant. There did not appear to be any reasonable objection to the formal permission to sublet. Moreover, there had been a breach of the requirement in section 1(3)(b) to give formal notification that consent would not be forthcoming because of the failure to provide the references.
The request for an undertaking had also been unreasonable. Although such a request might have been reasonable in general terms, it should have been made within a few days of the original request for consent, not six weeks later, once the transaction had already started. The landlord’s duty was not only to give consent or notice of a refusal, but also to “get on with” the tenant’s application. If the defendant wished to make an undertaking a condition of granting consent, then, pursuant to section 1(3)(b)(i), it should have notified the claimant at a much earlier stage in the proceedings. The request had not only to be reasonable but also to be made reasonably, and it had to be reasonable for the landlord to rely upon compliance with it before using it as a reason for either refusing consent or failing to give that consent. Furthermore, the amount of the costs claimed had to be reasonable: Don Bang Minerva (UK) Ltd v Davina Ltd [1996] 2 EGLR 31; [1996] 31 EG 87 applied. Although the claimant’s request for consent for alterations had also been made tardy, that did not “reset the timetable” for the giving of consent to the subletting. The request for the alterations should not have been an impediment to consent to the subletting once the references that were reasonably required had been provided. Consent should have been given within seven days of the bank reference having been provided, and the failure to do so amounted to an unreasonable withholding of consent.
The defendant should also have consented to the alterations. There was no indication that they might be inappropriate or harmful to the reversion. The lease provided for payment of costs relating to permission to alter the premises, so the defendant’s position was adequately covered by the terms of the lease.
Katharine Holland (instructed by Eversheds, of Birmingham) appeared for the claimant; Paul Clarke (instructed by Max Bitel Greene) appeared for the defendant.
Sally Dobson, barrister
