Gabb v Farrokhzad [2022] EWHC 212 (Ch); [2022] PLSCS 26 should serve as a cautionary tale for landlords who unreasonably withhold consent to assign a lease.
A tenant has interlinked contractual and common law remedies against a landlord who unreasonably withholds consent after a valid request is made.
Under the common law, where a fully qualified covenant exists, the obligation on a tenant to obtain landlord’s prior consent ceases to bite if the landlord unreasonably withholds consent. The tenant is at liberty to assign the lease and can seek a declaration to the effect.
Pursuant to sections 1 and 4 of the Landlord and Tenant Act 1988, the tenant can sue their landlord for damages in respect of the failure to grant consent to assign within a reasonable time, unless the landlord’s reasons for refusing consent are (a) reasonable and (b) notified to the tenant within a reasonable time.
In Gabb, the claimant was the long lessee of flat situated on Kensington Park Road, London W11. The defendant was the freeholder of the building. The claimant’s lease contained a fully qualified covenant against assignment. In accordance with the terms of his lease he sought consent from his landlord to assign his lease on two separate occasions. In respect of both requests he alleged that his landlord behaved unreasonably in withholding consent.
The claimant alleged that the defendant by his conduct acted in a manner intended to cause unreasonable delay. On the first occasion consent was sought, the freeholder commenced forfeiture proceedings for minor breaches of the lease and threatened major refurbishment works. The First-tier Tribunal found that the defendant knew that his predecessor-in-title had agreed to the breaches. Additionally, the breaches were minor and easily remedied. The defendant appealed the FTT’s determination and the claimant’s potential buyer pulled out of the sale due to the defendant’s conduct.
In October 2021, the claimant accepted a new offer to purchase his flat. He again sought consent from the defendant. The defendant delayed by (a) instructing managing agents to deal with the consent to assign and request for information; (b) instructing surveyors to provide a list of major works in relation to the building six weeks after the request was made; and (c) by subsequently appointing solicitors to provide the licence to assign and seek references from the proposed assignee who was a well-known multi-billionaire.
In finding for the claimant, the High Court applied the test for “unreasonable” refusal of consent laid down in Ashworth Frazer Ltd v Gloucester City Council [2002] 1 EGLR 15 and refined in Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47; [2019] EGLR 52. The court underscored that in the context of a residential lease, the lease was a valuable and tradeable capital asset, and was an interest that far exceeded, in value and importance, the very limited reversion of the landlord. In such circumstances, the landlord had to consider whether the benefit to him and the detriment to the tenant of withholding consent would be so disproportionate as to make the refusal of consent unreasonable.
In the present case the court was unimpressed with the technical arguments raised by the defendant in challenging the validity of the requests for consent. It found that the requests were validly made and understood by the defendant to be requests for consent to assign.
The court found that the landlord unreasonably withheld consent. It made a declaration that the claimant had the right to assign the lease without obtaining landlord’s consent to anyone he chose. The claimant was also awarded damages for his losses flowing from the defendant’s unreasonable behaviour – the greatest being the difference between the purchase price he would receive if the current proposed sale of the flat completed, which would amount to a loss of £50,000.
Elizabeth Dwomoh is a barrister at Lamb Chambers
