The Court of Appeal ruled this week on a possible test case relating to a landlord’s discretion to refuse a leaseholder permission to apply for planning permission.
The case concerns 51 Brewer Street, a terraced building in the heart of Soho, W1. The owner of the lease is a BVI-registered company called Hautford and the freeholder is a company called Rotrust Nominees.
Under the terms of the lease, which has 70 years to run, the leaseholder is obliged to seek the consent of the freeholder before applying for any planning permission, with the consent “not to be unreasonably withheld”.
Hautford wishes to apply for planning permission to change the use of the first and second floors to residential. However Rotrust has refused to allow this, saying that allowing it would help Hautford acquire the freehold of the property.
Leaseholder enfranchisement
This is because the change of use would make the property 52% residential, and thus eligible for leaseholder enfranchisement.
Rotrust also said that allowing planning permission would “undermine management control of the Soho Estate”.
Rotrust claims that its refusal is reasonable. Hautford says it isn’t.
This may be the first time ‘reasonableness’ in this context has been tested by the courts, Master of the Rolls Sir Terence Etherton said in his ruling, which was handed down yesterday.
“There appears to have been no reported case concerning the reasonableness of a landlord’s refusal of consent pursuant to a tenant’s covenant not to apply for planning permission without the landlord’s consent, such consent not to be unreasonably withheld,” he said.
Even so, he said the “general principles” are not in dispute.
He ruled in favor of the leaseholder, saying that the freeholder’s argument were, in effect, a rewriting of the lease.
If Rotrust’s argument was correct, he said, the freeholder could stop the leaseholder from applying for change-of-use planning permission for the duration of the lease.
Take advantage
“Hautford would be precluded from doing so, even though any third party would be free at any time to make such an application and, if made and successful, Hautford could take advantage of the planning permission,” he said.
“Indeed, that would have been the position from the first day of the 100-year term. It seems inconceivable that this was the intention of the original parties to the lease.”
Thomson Snell & Passmore partner Mark Steggles, who acted for Hautford said: “We are pleased to have worked with our Counsel, Tiffany Scott QC, to secure an excellent result for Hautford that enables them and their tenant to make full use of the property.”
Hautford plans to appeal the ruling to the Supreme Court.
Rotrust Nominees Limited v Hautford Limited
Court of Appeal (Etherton MR, McCome LJ, Lindblom LJ) 17 April 2018
Philip Rainey QC (instructed by Trowers and Hamlins LLP) for the Appellant
Tiffany Scott QC (instructed by Thomson Snell and Passmore LLP) for the Respondent
