Landlord and tenant – Change of use – Consent – Appellant landlord refusing consent for conversion of office building to flats – Judge granting declaration that consent unreasonably withheld – Appellant applying for permission to appeal – Whether risk of leasehold enfranchisement resulting from creation of flats justifying withholding of consent – Application dismissed
The appellant held the freehold title to commercial premises used as offices in London W1. The respondent was the tenant of the building under a 999-year lease dated 23 March 1926. The lease did not prohibit residential use, but contained a covenant against alterations without the consent of the landlord. It was common ground that, by virtue of section 19 of the Landlord and Tenant Act 1927, consent was not to be unreasonably withheld.
The respondent applied for consent to convert the building into 16 new residential flats. The appellant refused consent on the ground, amongst other things, that it would open up the possibility of collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993, with the result that the appellant would lose the freehold reversion.
The respondent sought, and was granted, a declaration that the appellant had unreasonably withheld its consent for the proposed alterations to convert the building from its current use as offices to create new flats. Although the judge accepted that the possibility of a future enfranchisement claim, where no such possibility existed before, was a reasonable consideration to take into account, he concluded that, on the evidence, the point was wholly speculative and a matter which no reasonable landlord would take into account in refusing consent for alterations.
The appellant applied for permission to appeal, contending that the possibility of leasehold enfranchisement that would result from creation of the flats justified its decision to refuse consent. It argued that such a risk might result in it losing control of the building, which it needed to protect its wider estate.
Held: The application was dismissed.
The judge had been entitled to conclude that the risk of leasehold enfranchisement did not make a refusal of consent reasonable and the court was not satisfied that the proposed appeal had a reasonable prospect of success. Furthermore, the possibility of collective enfranchisement in the present case was entirely speculative, not least because the respondent had not actually said that it intended to let the flats on long leases which was a pre-requisite for claiming leasehold enfranchisement. The respondent could have decided just to let them at a rack rent, on assured shorthold tenants (ASTs) if the rent was less than £100,000 per annum or otherwise as contractual tenancies. Even if they were let on long leases, it was wholly speculative as to whether enough leaseholders would then band together to try to exercise the right of collective enfranchisement. As there had been no arguable error in the judge’s approach, permission to appeal against his decision would be refused: Norfolk Capital Group v Kitway Ltd [1977] 1 QB 506, Bickel v Duke of Westminster [1977] 1 QB 517 and Henley v Cohen [2013] EWCA Civ 480; [2013] PLSCS 91 considered.
Adam Rosenthal (instructed by Stephenson Harwood) appeared for the appellant; John Furber QC (instructed by Brecher Solicitors) appeared for the respondent.
Eileen O’Grady, barrister
