Lease — Building divided into flats — Covenant against subletting — Landlords’ consent not to be unreasonably withheld — Landlords refused consent — Likelihood of creating protected tenancies — Alleged damage to reversion — Whether landlords’ consent unreasonably withheld
The plaintiff holds a lease of 71 Addison Road, London W14, granted in 1969 and expiring in the summer of 1992. The building consists of a basement and ground-floor flat occupied by the plaintiff, a first-floor flat the plaintiff wanted to let to his son and a second-floor flat he wanted to let to some friends. The lease contained a covenant that the tenant would not assign, underlet or part with possession without the prior written consent of the landlords, such consent not to be unreasonably withheld to an underletting of the basement/ground-floor flat, the first- or second-floor flats to one underlessee in each case. There was a covenant against any underletting in the last four years of the tenancy; a covenant to ensure that any rents were never less than two thirds of the annual value, and a covenant requiring the user of the building as three family dwellings.
The landlords had refused consent to the proposed sublettings on the ground that the subleases would damage their reversionary interest by about £600,000 in that, although the plaintiff would be regarded as a resident landlord for the purposes of section 12 of the Rent Act 1977, should he stop residing in the building before the subleases expired, the subleases were likely to become protected tenancies under the 1977 Act.
Held The plaintiff tenant was entitled to the declaration sought that the landlords had unreasonably withheld consent. Although at the time of the grant of the lease any subleases would have become protected tenancies, the reforms to the Rent Acts could not have been foreseen at that time. Supervening legislation had moved in favour of landlords to the extent that in the circumstances of the present case subtenants would not have protected tenancies so long as there was a resident landlord within the meaning of section 12 of the Rent Act 1977.
In principle it was legitimate to consider the risks to the value of the landlords’ reversion in the future because of supervening legislation: see Leeward Securities Ltd v Lilybeath Properties Ltd (1983) 271 EG 279 per Oliver LJ at p 282. However, the reasonableness of a landlord’s withholding consent must be considered in the context of a particular covenant in a particular lease. The present lease required multiple occupation and for the landlords to refuse consent to the proposed sublettings would deprive the tenant of the benefit of that requirement. There was a possibility of statutory tenancies arising, but a statutory tenant was not necessarily irremovable. By and large, legislative changes in recent years had moved in favour of landlords, and as the defendants were the owners of a large estate, that trend should be considered. It was in the circumstances unreasonable for the landlords to refuse consent.
Norfolk Capital Group Ltd v Kitway Ltd
[1977] QB 506;
Bickel v Duke of Westminster
[1977] QB 517;
West Layton Ltd v Ford
[1979] QB 593; and
International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd
[1986] 1 EGLR 39 considered.
David Neuberger QC (instructed by Fremont & Co) appeared for the plaintiff tenant; and Derek Wood QC and Edward Deneham (instructed by Walters Fladgate) appeared for the defendant landlords.
