Lease – Assignment – Consent – Lease expressly providing that landlord’s consent not to be unreasonably withheld where assignment to respectable and responsible assignee – Defendant landlord refusing consent – Proposed assignee not respectable and responsible following recent incorporation – Whether defendant unreasonably refusing consent – Claim dismissed
In September 1979, the defendant’s predecessor granted to the claimant’s predecessor the lease of an office building for a term of 42 years. The terms of the lease included a tenant’s covenant not to assign without the consent of the landlord, which was not to be unreasonably withheld in the case of a respectable and responsible assignee. The permitted use of the property was restricted to that of a bank or as offices with ancillary car parking. The original lessee subsequently merged with the claimant, which was the current tenant under the lease, and the reversion passed to the defendant. The rent with effect from 2004 until the end of the term was £405,000.
As a result of the merger, the claimant became liable under the reversion as though it had entered into the original covenants and, by virtue of the Landlord and Tenant (Covenants) Act 1995, the claimant remained liable under the reversion in the event of an assignment.
The building had been unoccupied for some time when the claimant informed the defendant that it wanted to assign the lease to a UK company that provided professional property services, financial and investment advice and project-management services to UK and European clients. The claimant indicated that it was prepared to offer a three-month rent deposit to secure its obligations under the lease.
By a letter dated 10 October 2007, signed by W, the defendant refused its consent to the proposed assignment on the ground that the assignee had been incorporated for only two months and therefore could not be regarded as a respectable and responsible assignee.
The claimant applied to the court, under section 19(1) of the Landlord and Tenant Act 1927, for a declaration that the defendant had unreasonably withheld its consent. The court rejected the claimant’s application for summary judgment of its claim, concluding that it was impossible to say that there was no real prospect of resisting the application: see [2008] EWHC 579 (Ch).
Accordingly, the claim proceeded and W provided a witness statement setting out the reasons for refusing consent to the assignment. Issues arose as to the actual reasons for the refusal and whether, in those circumstances, a reasonable landlord could have concluded that the proposed assignee was not respectable and responsible.
Held: The claim was dismissed.
On the facts, the reason for withholding consent had been adequately stated in the defendant’s written response to the claimant’s application, which was elaborated in W’s witness statement, to comply with section 1(3) of the Landlord and Tenant Act 1988, which set out the qualified duties owed by a landlord regarding consent to the assignment of leases.
Under section 1(6) of the 1988 Act, the onus of proving that it was reasonable to withhold consent was on the landlord and was a question of fact. The decision rested on the facts of the case and should not be elevated to a principle of law. The court did not have to be satisfied that the reason was correct or justifiable, only that a reasonable person in the defendant’s position could have reasonably advanced it: Ashworth Frazer Ltd v Gloucester City Council (No 2) [2001] UKHL 59; [2002] 1 EGLR 15; [2002] 05 EG 133 considered.
In the instant case, the court preferred the defendant’s case and concluded that the defendant had satisfied the court that the reason for withholding consent was one that a reasonable landlord in the defendant’s position could have relied upon: International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 EGLR 39; (1985) 277 EG 65, British Bakeries (Midland) Ltd v Michael Testler & Co Ltd [1986] 1 EGLR 64, Ponderosa International Development Inc v Pengap Securities (Bristol) Ltd [1986] 1 EGLR 66; (1985) 277 EG 1252 and NCR Ltd v Riverland Portfolio No 1 Ltd (No 2) [2005] EWCA Civ 312; [2005] 2 EGLR 42; [2005] 22 EG 134 considered.
Simon Brilliant (instructed by Olswang) appeared for the claimant; Timothy Fancourt QC (instructed by Lovells LLP) appeared for the defendant.
Eileen O’Grady, barrister
