In NCR Ltd v Riverland Portfolio No 1 Ltd [2004] EWHC 921 (Ch); [2004] 16 EG 110 (CS), Riverland was found to have unreasonably withheld its consent to NCR’s request for permission to underlet because, among other things, the judge did not accept that, in view of NCR’s continuing liability as tenant, the inadequate covenant strength of the proposed undertenant was a reasonable ground for refusing consent.
The Court of Appeal, however, has recently overturned that decision: see NCR Ltd v Riverland Portfolio No 1 Ltd [2005] EWCA Civ 312; [2005] 13 EG 135 (CS). It ruled that because of the potential for the undertenant, as a secured tenant, to call for a new lease from Riverland, the latter was entitled to be concerned about the weakness of the proposed undertenant’s covenant. In addition, because of the serious implications that a refusal of consent would have, Riverland was entitled to adequate time in order to consider the application, including reporting to its board if necessary. Absent special circumstances, the Court of Appeal did not consider that a period of three weeks would be unreasonable for this.
This decision, given by Ward, Carnwath and Slynn LJJ, is a very welcome decision for landlords, who should no longer feel pressurised into rushing decisions on applications that are less than straightforward.
Suzanne Dray is a solicitor at Mayer, Brown, Rowe & Maw LLP
In NCR Ltd v Riverland Portfolio No 1 Ltd [2004] EWHC 921 (Ch); [2004] 16 EG 110 (CS), Riverland was found to have unreasonably withheld its consent to NCR’s request for permission to underlet because, among other things, the judge did not accept that, in view of NCR’s continuing liability as tenant, the inadequate covenant strength of the proposed undertenant was a reasonable ground for refusing consent.
The Court of Appeal, however, has recently overturned that decision: see NCR Ltd v Riverland Portfolio No 1 Ltd [2005] EWCA Civ 312; [2005] 13 EG 135 (CS). It ruled that because of the potential for the undertenant, as a secured tenant, to call for a new lease from Riverland, the latter was entitled to be concerned about the weakness of the proposed undertenant’s covenant. In addition, because of the serious implications that a refusal of consent would have, Riverland was entitled to adequate time in order to consider the application, including reporting to its board if necessary. Absent special circumstances, the Court of Appeal did not consider that a period of three weeks would be unreasonable for this.
This decision, given by Ward, Carnwath and Slynn LJJ, is a very welcome decision for landlords, who should no longer feel pressurised into rushing decisions on applications that are less than straightforward.
Suzanne Dray is a solicitor at Mayer, Brown, Rowe & Maw LLP
