Tenant complaining of landlord’s refusal to consent to subletting and to change use from nightclub to health and fitness centre – Whether refusals unreasonable – Whether landlord’s expert witness entitled to assume that popularity of such centres was a passing fad – Judgment for tenant
The claimant tenant occupied premises in Norwich under a 20-year lease from 20 February 1996. The premises had, at all material times, been occupied as a nightclub. By the terms of the lease, the tenant covenanted not to underlet without the landlord’s written consent, nor, without such consent, to allow the premises to be used for any purpose other than that of a nightclub. In either case, the landlord’s consent could not be unreasonably withheld. In early 1999, the tenant, having formed the view that nightclub use had ceased to be profitable, found a prospective subtenant who wished to operate the premises as a health and fitness club. In November 1999 the tenant applied to the landlord for a licence to underlet and change the use of the premises. The landlord confirmed its refusal of consent, giving as its reason that, upon the advice of its surveyor (W), the change of use, coupled with the surrender of the nightclub’s licence, would cause a £300,000 loss in the value of the landlord’s reversion. The tenant sued, inter alia, for a declaration that the consent had been unreasonably withheld.
At the trial, evidence was given by a surveyor for the tenant, and by W, who based his calculations, upon the view that the health and fitness industry should be seen as a fad. The judge found that while W was otherwise well qualified, he had, unlike the expert witness called by the tenant, done little to acquaint himself with the way in which that industry operated.
Held: The tenant was entitled to the declarations sought.
The refusal to permit the subletting was governed by section 1 of the Landlord and Tenant Act 1988, which placed the burden of proving reasonableness upon the landlord. However, it was common ground that that issue could not be divorced from the refusal to permit the change of use, such refusal remaining subject to the common law rule requiring the tenant to establish unreasonableness. Upon the evidence before the court, the tenant had, with the aid of its expert witness, established that the value of the landlord’s interest was the same whether the premises was used as a nightclub or as a health and fitness centre. If W had taken the trouble to find out about the health and fitness sector, and had not relied upon pure instinct, he would have gained access to the same body of professional opinion that the tenant’s expert had brought to the attention of the court.
Jonathan Small (instructed by Field Fisher Waterhouse) appeared for the claimant; Alistair Norris QC (instructed by Hatch Brenner, of Norwich) appeared for the respondent.
Alan Cooklin, barrister
