Building lease – Rent review operating in landlords’ favour in event of change of use – Lessee required to build in accordance with specifications consented to by landlords – Consent not to be unreasonably withheld – Lessee’s application for consent accompanied by inadequate specifications – Lessee refusing to comply with landlords’ request for further information – Landlords refusing consent – Lessee alleging unreasonable refusal – Whether material that landlords seeking to engineer a change of use – Judgment for landlords
The claimant company held a 3.5 acre development site under a 125-year lease granted by the defendant council in April 1988 at a rent of £17,000 pa, subject to review every seven years. Under the terms of the lease, as amended, the company was required, inter alia: (i) to erect a hotel in accordance with plans and specifications having the written consent of the landlord; (ii) to complete the hotel for use and occupation by no later than August 2001 (the readiness date); and (iii) not, without the landlord’s consent, to use the premises for any trade other than as a hotel (with conference facilities) capable of obtaining a three-star rating. References to “consent of the landlord” implied that such consent would not be unreasonably withheld. The operation of the rent review provisions depended upon whether the use at the material time was for a hotel or another authorised use. In the former case, the revised rent was to be geared to room prices; in the latter case, the council would be entitled to the market rent.
At a meeting between the parties in September 2000, a representative of the company (R) handed to a surveyor engaged by the council (B) a letter formally requesting consent to the erection of a hotel in accordance with plans and specifications attached to the application (the specifications). The letter went on to state that, should such consent be given, it was a condition of the application that the readiness date should be changed to August 2003. After studying the specifications, B pressed R for further details, but the response of R (as recorded in a council note) was “What you see is what you get”.
In October 2000 the relevant subcommittee of the council met to consider a report prepared by various officers. The report alerted the committee to various deficiencies in the specifications and pointed out that a change of use would bring a substantial gain to the council in the form of a market rent award backdated to October 1999. The committee was advised not to grant the requested time extension, and not to consent to the proposed development, unless an acceptable application were made for a change of use and further details were provided of the intended hotel. In November 2000 B wrote to the company on the council’s behalf, refusing to amend the readiness date or to consent to the erection of the proposed hotel, as the specifications provided insufficient detail and information. B’s letter also reminded the company that an application for change of use would be required if the proposed development was not in accordance with the user clause.
The claimant sued for a declaration that the council’s consent had been unreasonably withheld, contending, inter alia, that their attitude towards the application was coloured throughout by their desire to trigger a change of use of the land. At the hearing, it was found as a fact that the documents were entirely insufficient for the purpose of the application as they conveyed little or no information as to the layout of the various facilities, the appearance of the building, and the location and dimensions of various structures.
Held: The declaration was refused.
1. No reasonable landlord could have been expected to form any conclusion upon the material before the court. The council, as landlords, were entitled to be informed as to what was “in substance the true nature of the tenant’s proposals, to which [their] consent was sought”: see per Lord Atkinson in Fullers Theatre & Vaudeville Co Ltd v Rofe [1923] AC 435. Given that the additional information sought by the council was relevant to the application to build, it was immaterial that the council’s queries were directed to questions of change of use and its possible consequences: Ashworth Frazer Ltd v Gloucester City Council [2000] 1 EGLR 44 considered. The bad reason did not, on the facts, vitiate the good reason: see Woodfall’s Landlord and Tenant para 11.139.
2. Nor were the council limited to the reasons communicated at the time of the refusal: see Bromley Park Garden Estates Ltd v Moss [1983] 1 EGLR 65. The claimant could not rely upon Norwich Union Life Insurance Society v Shopmoor Ltd [1998] 2 EGLR 167 for the proposition that the law had since moved on, as that case was concerned with the (statutory) changes made by the Landlord and Tenant Act 1988, which were confined to covenants against alienation.
3. The council were, in any event, entitled to refuse consent upon the ground that the application was conditional upon them agreeing to do something (defer the readiness date) that they were in no way bound to do.
Jonathan Brock QC and Katherine Astill (instructed by Hedleys, of East Horsley) appeared for the claimant; Kim Lewison QC (instructed by Hunt & Coombs, of Peterborough) appeared for the defendants.
Alan Cooklin, barrister
