The Landlord and Tenant Act 1988 applies to leases that prohibit tenants from assigning without their landlord’s consent. It places landlords under a duty to consent to a request for a licence to assign within a reasonable time, unless it would be reasonable not to do so.
No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250; [2018] PLSCS 34 concerned the assignment of long leasehold interests in two high value residential apartments in London. The tenant sought a declaration that the landlord had unreasonably refused licences to assign because it was unwilling to obtain and supply bank references for the prospective assignees and to pay for each apartment to be inspected by a surveyor before the assignments at a cost of £350 plus VAT per apartment. In addition, the tenant had refused to provide the landlord with undertakings to pay costs of £1,250 plus VAT for each licence to assign, complaining that the figure was too high.
The High Court accepted that it had been reasonable for the landlord to require bank references to satisfy itself that the assignees would be able to pay the service charges, and to want a surveyor to inspect the properties to ascertain whether there were any serious breaches of covenant. The judge also agreed that the cost of the inspections was not excessive. But he went on to rule that the landlord’s own costs were unreasonable, because there was no evidence to suggest that the licences would cost more than £350 each. So, although two of the landlord’s reasons for refusing a licence to assign were reasonable, it had been unreasonable to refuse consent on the ground that the tenant was refusing to pay such high legal and administrative costs.
The question for the Court of Appeal was: did the unreasonable ground for refusing consent taint or vitiate the grounds that had been upheld? The judge at first instance ruled that it did, but the Court of Appeal has overturned that decision.
Lord Justice Lewison reminded the parties that if, for example, a contracting party asserts that the other party is in breach, and gives a good reason and a bad reason for that assertion, it will be permitted to rely on the good reason. Similarly, in the case of a notice served under section 146 of the Law of Property Act 1925 alleging multiple breaches of covenant, the fact that some breaches are not proved will not invalidate the notice. So too in the case of a mortgagee’s exercise of its power of sale, the exercise will be valid if the lender is seeking to recover the secured debt, even if it has other improper reasons for its action.
The theme running through all the cases considered by the court was that if the decision maker would have reached the same decision without relying on reasons that were bad, then the bad will not have tainted or vitiated the good. So the question was not: were all the reasons that the landlord gave for its decision reasonable? It was, in fact: was the decision to refuse consent reasonable? And where, as here, all three reasons for the landlord’s decision were free-standing, and each had causative effect, and two of the reasons given were reasonable, the decision to refuse a licence to assign was reasonable.
Allyson Colby, property law consultant
