The Landlord and Tenant Act 1988 applies to leases that prohibit tenants from assigning without their landlord’s consent. It places landlords under a duty to consent to a request for a licence to assign within a reasonable time, unless it would be reasonable not to do so.
No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2016] EWHC 2438 (Ch) concerned the assignment of long leasehold interests in three high value residential apartments in London. The tenant sought declarations that the landlord had unreasonably refused to provide licences to assign the leases of two of the apartments. It had required bank references for the prospective assignees and had stipulated that each apartment must be inspected by a surveyor first. In addition, the landlord had required undertakings for its own fees in the sum of £1,250 plus VAT for each licence to assign.
The court agreed that it had been reasonable for the landlord to require bank references to satisfy itself that the assignees would be able to pay the service charges. It was irrelevant that the assignees were paying substantial premiums for the leases; landlords cannot be expected to speculate about the financial position of a prospective assignee on the basis that it can afford to acquire the premises. A bank reference would have been simple and inexpensive to provide, and the requirement was not onerous.
The apartments had been occupied by a series of short-term tenants. Therefore, it had been reasonable for the landlord to employ a surveyor to inspect the properties to ascertain whether there were any serious breaches of covenant. Furthermore, the cost of £350 plus VAT, per apartment, was not excessive.
However, the landlord’s own fees were unreasonable, since there was no evidence to suggest that the licences cost it more than £350 each. And, where a landlord has several reasons for withholding consent, if the good reasons are makeweights and the real reason for refusal is a bad one, or where a bad reason vitiates good ones, consent will have been unreasonably withheld. In this case, there was no evidence to suggest that the landlord would have modified its position on its fees, even if the tenant had accepted the landlord’s other conditions, and the judge considered that this tainted the landlord’s legitimate reasons for refusing to grant licences to assign.
The tenant’s application for a declaration that the landlord had been too dilatory in dealing with its request for a third licence to assign was less successful. It had sent its initial application by letter to an address given by the landlord for that purpose and E.ON UK plc v Gilesports Ltd [2012] EWHC 2172 (Ch) is authority for the proposition that the 1988 Act is not engaged, even though a landlord knows about an application and is discussing it with its tenant, until an application for licence to assign is properly served on the landlord at its registered office.
Surprisingly, the judge ruled that the landlord had not waived this requirement by indicating where applications should be sent in the first instance, observing that the serious legal consequences flowing from the legislation require that the process of application and decision should be subject to a reasonable degree of formality. Therefore, time had not started to run until the tenant had addressed its request to the landlord at its registered office.
Allyson Colby is a property law consultant
