Landlord refusing consent to assignment on ground that prospective assignee solely concerned to spoil development proposal of prospective buyer of freehold reversion – Whether refusal reasonable notwithstanding that proposal depended upon acquisition of demised land
The plaintiff (BRS) held land (the BRS site) in Lutterworth under a lease expiring in 2003, which contained a qualified covenant against assignment and an absolute prohibition of retail use. In November 1996 BRS agreed subject to contract to grant to a developer (T) a six-month option to acquire the lease for £50,000. On December 19 1996 a rival developer applied for planning permission to develop an adjacent site (the Safeway site) to provide a Safeway supermarket. On February 10 1997 T, having opened negotiations with the first defendant (the landlords), applied for planning permission to develop the BRS site and certain other land to provide a Sainsbury supermarket. On February 24 1997 T entered into a formal agreement with the landlords to buy the freehold of the BRS site for £1.25m conditionally upon grant of the desired planning permission. The agreement obliged the landlords,inter alia, not to grant any consent unless the withholding of consent would render them liable to BRS. In April 1997 the rival developer approached BRS with a view to buying the lease, knowing that such a purchase would seriously affect the Sainsbury proposal. On May 30 1997 BRS formally agreed to assign the lease to Safeway for £50,000, both parties undertaking to use their reasonable endeavours to obtain the landlords’ consent. BRS then informed T that the option would not be granted. On June 4 1997 BRS applied in writing for the landlords’ consent to the assignment to Safeway. By a solicitor’s letter dated June 17 1997, the landlords refused consent on the grounds: (i) that the assignment, being intended to spoil the Sainsbury project, would be injurious to the landlords’ interests; and (ii) that the proposed assignee would breach the user restriction in the lease. On the evening of the same day the council’s planning committee resolved that permission be granted for both sites. BRS sued for a declaration that the landlords had unreasonably refused their consent to the Safeway assignment.
Held The declaration was refused.
1. BRS could not claim that no reasonable landlord would have advanced the first ground for refusal. At the date of their solicitor’s letter the landlords could not have been certain how an approval would have affected the Sainsbury planning application. That the landlords had considered the interests of T, a stranger to the lease, was no objection in the present case as it was in their interest to meet T’s requirements under their agreement. Again, while as a general rule it was unreasonable to refuse consent with a view to obtaining a surrender of the lease (see Bromley Park Garden Estates Ltdv Moss [1982] 1 WLR 1019) it was otherwise where the proposed assignee was not concerned with beneficial occupation but with adopting a ransom position with regard to the landlord’s development proposals and was accordingly an undesirable lessee: see Pimms Ltd v Tallow Chandlers Co [1964] 2 QB 547.
2. The second reason was bad because breach of the user covenant would not have been a necessary incident of the assignment to Safeway: see Killickv Second Covent Garden Property Co Ltd [1973] 1 WLR 658. However, both at common law and under the Landlord and Tenant Act 1988, the presence of a bad reason did not vitiate a refusal founded upon a sound independent reason: Berenyi v Watford Borough Council [1980] 2 EGLR 38 explained.
Kirk Reynolds QC and Timothy Harry (instructed by Lee Crowder, of Birmingham) appeared for the plaintiff; Paul Morgan QC and Wayne Clark (instructed by Addleshaw Booth & Co, of Leeds) appeared for the defendant.
