Landlord and tenant – Assignment of lease – Consent – Claimant tenant contending defendant landlord’s refusal of consent to assignment of lease unreasonable – Claimant seeking declaration allowing assignment of lease without consent and damages under section 4 of Landlord and Tenant Act 1988 – Whether claimant establishing consent unreasonably withheld – Claim allowed in part
The defendant was the landlord of a residential flat at 120A Kensington Park Road, London. The claimant was the lessee. The flat included almost the whole of the building from the first floor to the roof. However, there was a ground floor shop and basement, which was in the hands of the defendant.
The claimant made various attempts to sell the flat by assigning the lease which, he said, were defeated (or were threatened to be defeated) by the unreasonable conduct of the defendant by refusing to consent to the assignment. He argued that, because the defendant’s conduct had been unreasonable, he was entitled to both a declaration that he might assign without consent, and to damages under section 4 of the Landlord and Tenant Act 1988. He also sought an injunction in respect of the defendant’s future conduct in relation to the latest proposed sale and exemplary damages.
The defendant argued that his actions had not been unreasonable. However, if they were, various formal defects in the communications made by the claimant in respect of his requests for consent meant that those requests did not satisfy the requirements of the 1988 Act, so that liability did not in fact arise.
The claimant argued that his repeated applications for consent to assign the lease to a new owner had been met by unjustified claims of breach of covenant and threats to forfeit the lease. The defendant had also stated that unspecified major works were required to which the lessee would have to contribute, caused unreasonable delays and imposed unreasonable conditions.
Held: The claim was allowed in part.
(1) The court rejected the defendant’s technical points challenging the validity of the requests for consent to assign. The claimant’s communications in respect of those requests satisfied the requirements of the 1988 Act as they were valid under the terms of the lease, had been received and were understood to be requests. That had the effect of triggering rights both under the lease and the 1988 Act which imposed statutory duties on the landlord.
(2) A tenant had a right at common law to assign his lease without consent if the landlord unreasonably refused consent. He also had the right under section 4 of the 1988 Act to sue the landlord for damages in respect of his failure to grant consent to assign within a reasonable time, unless he had reasons for refusing the consent which were reasonable and notified in good time to the tenant. The 1988 Act supplemented the position at common law. The two sets of rights were intended to operate together and were interlinked: Footwear Corp Ltd v Amplight Properties Ltd [1998] 2 EGLR 38 considered.
At common law, unless the lease otherwise provided, a request for consent to assign need not take any particular form nor be served in any particular manner. It was effective when it came to the attention of the landlord that their consent to assign was being sought.
Under the 1988 Act, the statutory duties were triggered by service of a written application for consent to assign. Under section 1(3), in order to trigger liability, a request for consent had to be both written and served. Where a request was validly served, the landlord had to give consent (except in a case where it was reasonable not to do so) and serve on the tenant written notice of his decision.
Both at common law and under the Act, the landlord had a reasonable time to consider and respond to the request for consent. The reasonableness of the landlord’s position had to be tested by reference to the state of affairs at the expiry of the reasonable time: Norwich Union v Shopmoor Ltd [1998] 2 EGLR 167 applied.
(3) The landlord committed a breach of statutory duty by failing to respond within a reasonable time, which was equivalent to a refusal of consent without reasons. The length of a reasonable time depended on the circumstances of the particular case, including those known to landlord and tenant at the time the tenant made his or her application, and subsequent events. Moreover, once the landlord had served notice in accordance with the Act, there was nothing more for them to do, so they could not thereafter assert that a reasonable time had not elapsed: Go West Ltd v Spigarolo [2003] 1 EGLR 133 applied.
The test for unreasonable refusal was the same under the common law and the 1988 Act. A landlord was not entitled to refuse consent to assign on grounds which had nothing to do with the relationship of landlord and tenant in regard to the subject matter of the lease. The landlord’s obligation was to show that his conduct was reasonable, not that it was right or justifiable, giving “reasonable” a broad, common sense meaning: Ashworth Frazer Ltd v Gloucester City Council [2002] 1 EGLR 15 applied.
(4) The mere fact that there were or might be breaches of covenant on the part of the lessee at the time of the assignment was not per se sufficient to justify a landlord’s refusal to consent to an assignment. It depended on the seriousness of the breaches and the potential impact of the assignment on the landlord: Straudley Investments Ltd v Mount Eden Land Ltd (1997) 74 P & CR 306 and Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47; [2019] EGLR 52 considered.
In the present case, the declaration sought by the claimant would be granted and damages awarded to the claimant under the 1988 Act, including the abortive sale costs in relation to the proposed sale.
(5) Exemplary damages were appropriate where a landlord pursued a deliberately obstructive policy designed to prevent the tenant assigning their lease for their own gain, regardless of whether that policy succeeded. However, there was no evidence on either side as to what the defendant’s motivations for his conduct might have been, and it was not appropriate to award exemplary damages on pure guesswork. Nor was it appropriate to grant an injunction requiring the landlord to comply with his duties in respect of any future purchaser: Design Progression Ltd v Thurloe Properties Ltd [2004] 1 EGLR 121 considered.
Joanne Wicks QC (instructed by Forsters LLP) appeared for the claimant. Andrew Butler QC (instructed by Direct Access) appeared for the defendant.
Eileen O’Grady, barrister