Question: biding time on permission to sublet
I have received a letter from my tenant seeking permission to sublet the premises of which he has a lease. The lease states that my consent is “not to be unreasonably withheld” to this type of request but it does not say anything more about how I am to deal with it. I am not keen on the proposed subtenant, so I am wondering if I can take my time to respond to the application in the hope that the subtenant loses interest?
Answer
You are required under the Landlord and Tenant Act 1988 to give a decision on the application within a “reasonable time”. The timetable for this will depend on the circumstances of the case but it is usually measured in weeks rather than months. If you fail to comply with your statutory duty, then the tenant may seek a court declaration to this effect and/or damages – or else it may even decide to proceed with the transaction without obtaining your consent.
Explanation
Statutory duties arise when dealing with this type of application, under section 1 of the Landlord and Tenant Act 1988. These include an obligation to respond to the application “within a reasonable time”.
It can be tricky to know when this timetable has started because tenants often make incomplete applications. You should therefore check quickly whether you have all of the information you need in order to decide on the application. If not, request it from the tenant without delay.
The “reasonable time” permitted under the 1988 Act will depend on the circumstances of the case. There is no specified period under the Act and fairly short timetables have been allowed in some cases. In Blockbuster Entertainment Ltd v Barnsdale Properties Ltd [2003] EWHC 2912 (Ch); [2004] PLSCS 11, the court held that landlord’s consent could have been given within a week.
If your tenant’s application states that a decision is required urgently, bear this in mind and act accordingly. The decision in Mount Eden Land Ltd v Folia Ltd [2003] EWHC 1815 (Ch); [2003] PLSCS 188 indicates that notification of urgency is a factor to be taken into account when assessing the “reasonable time”.
Even if your tenant has not communicated any time constraints for dealing with its application, case law shows that a decision will be expected from a landlord within weeks rather than months. In NCR Ltd v Riverland Portfolio No 1 Ltd [2005] EWCA Civ 312; [2005] 2 EGLR 42, the Court of Appeal held that three weeks was not inherently unreasonable for a landlord’s decision on a consent application, particularly during the August holiday period. (The first instance judge had found that a fortnight was sufficient for a decision.)
Although it has no legal standing, the Protocol for Applications for Consent to Assign or Sublet (EG, 20 September 2014, p118) suggests that a landlord’s decision should be given within 21 days. However, it acknowledges that the “reasonable time” will depend on the circumstances of the case. Relevant factors include the speed with which the tenant responds to requests for information and the complexity of the transaction. Certainly, it would be unwise to assume that you have 21 days in which to make a decision and the safest course is to respond as soon as possible.
Question: unwelcome assignment
I am a landlord of commercial premises and have received an application from my tenant for consent to assign the lease to another company. I have two concerns over the proposed assignee. First, the proposed assignee is already a tenant of mine in adjoining premises under a lease which has an imminent break clause; if I give my consent I suspect it will vacate the other premises, which will cause me financial loss. Second, I am applying for planning permission for the building and have reason to believe that while my existing tenant has no plans to object, the proposed assignee will, prejudicing my application. Surely I can refuse consent for one or other of the above reasons?
Answer
No. A landlord is not entitled to refuse consent on a ground which has nothing to do with the relationship of landlord and tenant concerning the subject matter of the lease.
Explanation
In Houlder Bros & Co Ltd v Gibbs [1925] Ch 575, the tenant sought consent to assign its lease to a company which was already another tenant of the landlord. The landlord candidly gave its reasons for refusing consent that the proposed assignee was a good tenant, but was likely to terminate its existing tenancy of adjoining property, and, in the prevailing economic climate, it would have great difficulty finding a new tenant. The landlord argued that it was reasonable to withhold consent given the financial loss which it would suffer if the assignment were allowed.
On appeal, it was held that the purpose of the qualified covenant was to protect the landlord from the premises being used in some undesirable way or by an undesirable tenant and that as a result it was necessary to consider the covenant in the context of the actual premises and the actual contract made between the landlord and the tenant. On the facts of the case, however, the sole reason operating on the landlord’s mind was “something extraneous to the relation of landlord and tenant, something extrinsic from the lessee, and something which is wholly personal to the lessor”. Accordingly, the landlord’s refusal – for the purposes of the covenant – was unreasonable.
More recently in Ansa Logistics Ltd v Towerbeg Ltd & Ford Motor Co Ltd [2012] EWHC 3651; [2012] PLSCS 276, a landlord refused consent on various grounds, including that the proposed subtenant was objecting to its application for planning permission and that the grant of the underlease might therefore prejudice that application. The landlord’s refusal was found to be unreasonable, not only because the subtenant would have been able to object whether or not the underlease was granted, but also on the wider ground that the refusal was based on a matter which had nothing to do with the relationship of landlord and tenant in the context of the subject lease.
In short, therefore, both of your grounds for refusing consent would be unreasonable; only grounds relating to the relationship of landlord and tenant in the context of the premises can be properly advanced.
Emma Humphreys is a partner at Charles Russell Speechlys LLP and James Pickering is a barrister at Enterprise Chambers
Questions can be e-mailed to egq&a@charlesrussell.co.uk and egq&a@enterprisechambers.com
