Landlord and tenant – Covenant against alterations – Consent – Claimant holding lease of property subject to covenant not to carry out alterations without prior consent of defendant landlord not to be unreasonably withheld – Claimant seeking declaration that discharged from covenant because defendant unreasonably withheld consent – Whether claimant precluded from carrying out proposed works – Whether defendant unreasonably withheld consent – Application dismissed
The claimant was the tenant under a lease granting a term of 200 years less 10 days from 14 July 1986 of Marina Point, 14 Lanark Square, London E14, a four-storey mixed-use building on the Isle of Dogs. The defendant was the freehold owner of Lanark Square, which comprised three blocks of flats and other surrounding land, buildings, roads and parking.
By clause 3(f), the lease provided, among other things, that “…no additional or new building or structure of any kind shall at any time hereafter be erected upon the demised premises or any part thereof without the prior consent in writing of the Lessor, which shall not be unreasonably withheld or delayed…”.
The claimant sought a declaration that its obligations under the lease to seek consent from the defendant to alterations to the demised premises did not preclude it from carrying out: (i) works to add three floors to the building; and (ii) works to the ground floor of the premises to convert it from business to residential use.
The claimant argued that the defendant landlord had unreasonably withheld consent to the works, so that it was discharged from the covenant requiring approval. The defendant argued that over the course of negotiations, several versions of the draft licences for the alterations were produced. If the claimant wanted to obtain consent for an amended set of works, it was required to make new applications which would require a degree of formality.
Held: The application was dismissed.
(1) The issue involved consideration of section 19(2) of the Landlord and Tenant Act 1927, which implied into all leases containing a covenant not to carry out alterations without the landlord’s consent a proviso that consent to improvements would not be unreasonably withheld. The proposed works should be regarded as “improvements” for the purposes of section 19(2), which applied “notwithstanding any express provision to the contrary”. Therefore, if the express terms of the lease were less favourable to the tenant, the statutory provisions applied in priority to those terms. Here, the lease was potentially more favourable to the tenant than section 19(2) in that it also provided for any consent not to be unreasonably delayed.
It was common ground that neither the lease nor section 19(2) prescribed any particular form or degree of formality for an application for consent to be made. It had to be clear to the landlord that a request for consent to particular works had been made and that a response was required.
(2) A clear distinction needed to be drawn between informal exchanges, both internally and between the parties, and the formal process of application and decision contemplated by the 1927 Act. On the one hand, it was in all parties’ interests that there should be such free exchanges, with a view to reaching an agreed solution, without prejudicing their respective positions under the Act. On the other hand, the serious legal consequences resulting from the statutory scheme required that the process of application and decision should be subject to a reasonable degree of formality.
As part of the process of determining whether consent had been unreasonably withheld, it was necessary to determine the nature and scope of the proposal that was put to the landlord against which the reasonableness of the withholding of consent could be judged. In general, it would be good practice for tenants to make a written application for consent that clearly set out the scope of the works for which consent was requested and expressly requested that consent. However, all that was ultimately required under section 19(2) was that at a point in time: (i) the landlord was aware that it was being asked to give its consent to certain works; and (ii) the scope of the works for which consent was being requested were sufficiently clear.
Those issues had to be determined by reference to the facts and circumstances at that time. Where consent had been withheld rather than refused, that could be any time up to the date on which proceedings were commenced. The reasonableness or otherwise of the landlord’s response was then judged by reference to the facts and circumstances at the date on which proceedings were commenced.
(3) The reasons on which a landlord relied as grounds for withholding consent had to be the actual reasons that influenced the landlord’s decision at the time. Those reasons need not have been communicated to the tenant. The identification of those reasons involved a subjective enquiry into what was in the mind of the landlord at the time: Tollbench v Plymouth City Council 1988 EGCS 25; (1988) 56 P & CR 194, Kalford v Peterborough City Council [2001] PLSCS 76; [2001] 3 WLUK 474 and Iqbal v Thakrar [2004] 3 EGLR 21 considered.
The purpose of the covenant requiring the landlord’s consent to any alterations was to protect the landlord’s property interests. The landlord was not entitled to refuse or withhold consent on grounds which did not relate to the landlord’s property interests. In each case, it was a question of fact depending on all the circumstances whether the landlord, having regard to the actual reasons that impelled him to refuse consent, acted unreasonably. The landlord was entitled to take into account the implications of the proposals for implementation of the works in deciding whether to refuse or withhold consent: Iqbal applied. Sargeant v Macepark (Whittlebury) Ltd [2004] 3 EGLR 26 and Sportoffer Ltd v Erewash Borough Council [1999] 3 EGLR 136 considered.
(4) If the court reached the conclusion that some of the grounds on which the defendant relied were reasonable and others were not, the question was whether the defendant acted reasonably in withholding consent in the light of those reasons. The question was whether the decision to refuse consent was reasonable; not whether all the reasons for the decision were reasonable. Where, as here, the reasons were free-standing, each of which had causative effect, and two of them were reasonable, the decision itself was reasonable: No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250; [2018] EGLR 16 applied.
Piers Harrison (instructed by William Sturges LLP) appeared for the claimant; Nathaniel Duckworth (instructed by Howard Kennedy LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Messenex Property Investments Ltd v Lanark Square Ltd
