Reasonable reasons
Lease terms versus Freeholder’s interests
If a lease prohibits improvements being made to premises without landlord consent, section 19(2) of the Landlord and Tenant Act 1927 (the 1927 Act) imposes a proviso that such consent cannot be unreasonably withheld.
The installation of the fan is likely to be deemed an improvement, since this would be considered as such from your point of view: see Lambert v FW Woolworth & Co Ltd [1938] Ch 883.
In Iqbal v Thakrar [2004] EWCA Civ 592; [2004] 3 EGLR 21, the court confirmed that the following principles would be relevant to determining whether a landlord’s consent to an improvement had been unreasonably withheld:
? The purpose of the covenant is to protect your landlord from alterations that could damage its proprietary interests. Consent cannot therefore be refused on grounds that have nothing to do with your landlord’s proprietary interests.
? It is for you to show that consent has been unreasonably withheld by your landlord. Your proposals regarding the alterations must be clear in order to enable your landlord to make an informed decision.
? Your landlord does not need to show that its reasons for refusing consent were justified. It only needs to show that a reasonable landlord might have reached the same conclusions in those circumstances.
? The reasonableness of your landlord’s refusal will depend on the circumstances. For example, it may be reasonable to refuse consent to an alteration in order to convert the premises for a use that was not prohibited by the lease in certain circumstances.
? There may be cases where it would be disproportionate for a landlord to refuse consent having regard to the effect on itself and the tenant.
? Refusal cannot be on grounds of pecuniary loss alone. In those circumstances, your landlord should ask you for compensation.
The fact that the freeholder has raised concerns about the size and appearance of the fan suggests that it would be unlikely to consent to the alterations. Your landlord is probably entitled to take into account the attitude of the freeholder as it should not be expected to consent to any application that is likely to put it in breach of the headlease. In Eaton Mansions (Westminster) Ltd v Stinger Companies de Inversion SA [2011] EWCA Civ 607, it was held that the court should consider what the freeholder’s attitude would have been had the landlord asked for its consent. Eaton Mansions can be distinguished as it concerned a lease that expressly prohibited alterations and was argued on proprietary estoppel grounds. Arguably, where the proviso in section 19(2) of the 1927 Act applies, your landlord should make a formal application to the freeholder for consent, rather than assuming its position, in order to show that its consent has not been unreasonably withheld on this ground.
The landlord’s refusal on the ground that it owns a nearby café is in effect a competition ground. In the case of Sargeant v Macepark (Whittlebury) [2004] EWHC 1333 (Ch); [2004] 3 EGLR 26, the court stated that there is no rule of law that precludes a landlord from relying on perceived damage to its trading interests in neighbouring property as a ground for refusing consent to alterations. Further, a landlord who reasonably perceives that a proposed alteration will damage his trading interests is not necessarily confined to asking for monetary compensation.
The extent to which trading interests can be relied on is not clear. In Iqbal, the court stated that it may be reasonable for a landlord to refuse consent to an alteration in order to convert premises for a use that was not prohibited by the lease in certain circumstances. However, the fact that the proposed use is not prohibited under the lease is likely to be a relevant consideration.
If your landlord had granted consent, it would have been entitled to require as a condition the payment of a reasonable sum in respect of any diminution in value of the premises or any neighbouring premises it owned. You could argue that the absolute refusal is therefore disproportionate having regard to the effect on itself and on you and is beyond what is reasonable to protect the landlord’s interest. Arguably, the landlord is seeking to obtain a collateral advantage in preventing the proposed use and potential competition that it is not entitled to restrict under the terms of your lease.
You could issue court proceedings for a declaration that consent has been unreasonably withheld. Alternatively, you could leave the fan in situ – if your landlord takes action for the alleged breach of your lease, you could defend on the basis that consent was unreasonably withheld.
Question
I am the tenant of a health food shop pursuant to an underlease. My underlease states that I cannot carry out any external alterations or additions to the premises without my landlord’s consent. My landlord requires the freeholder’s consent for such alterations under the headlease.
I recently installed a large extractor fan on the roof to enable me to start serving hot food. I have obtained retrospective planning consent for these works and the use is permitted under the lease. I approached the freeholder, who said it would only consider a direct application from my landlord but commented that the new fan was “ugly, too large and likely to annoy the neighbours”. The landlord refused consent to the alterations on the basis that the freeholder is unlikely to consent and because it owns a café nearby and is concerned about competition if I start serving hot food.
Do I have to remove the fan?
Answer
This depends on whether your landlord was reasonable in refusing consent. It seems likely that they could take into consideration the attitude of the freeholder as your landlord would not be expected to consent to alterations that would put it in breach of its headlease.
However, arguably, your landlord should make the application to the freeholder rather than assume its position. The landlord’s own trading interests may be a reasonable ground for refusing. However, the court may consider that your landlord’s refusal on this ground is unreasonable given that the use is permitted under the lease and therefore your landlord is arguably seeking to obtain a collateral advantage.
