Surprisingly few cases have focussed on what constitutes landlord’s consent to assign, underlet or alter, or to change the use of premises. However, the decisions that have been reported suggest that each case will turn on its own facts and on the wording of the relevant contract or lease.
In British Telecommunications Ltd v Rail Safety and Standards Board Ltd [2011] PLSCS 210, the High Court had to interpret an agreement for underlease, which was conditional on the grant of licences by the superior landlord to underlet and alter premises. In the absence of such licences, either party was entitled to withdraw.
Surprisingly few cases have focussed on what constitutes landlord’s consent to assign, underlet or alter, or to change the use of premises. However, the decisions that have been reported suggest that each case will turn on its own facts and on the wording of the relevant contract or lease. In British Telecommunications Ltd v Rail Safety and Standards Board Ltd [2011] PLSCS 210, the High Court had to interpret an agreement for underlease, which was conditional on the grant of licences by the superior landlord to underlet and alter premises. In the absence of such licences, either party was entitled to withdraw. The parties executed a licence to underlet and had agreed a form of licence for alterations, which required one last signature – from the subtenant – when the subtenant purported to terminate the agreement for underlease. It argued that the agreement for underlease was conditional on the actual completion of the licences. The courts decided that all the following communications from landlords or their agents constituted consents to a tenant’s application: (i) a letter from the landlord’s agent headed “subject to licence” confirming that the freeholder consented to works, but that the tenant must enter into a licence for alterations – where the lease made no such requirement: see Mount Eden Land Ltd v Prudential Assurance Co Ltd [1997] 1 EGLR 37; [1997] 14 EG 130; (ii) A letter from the landlord’s surveyor, headed “subject to licence”, confirming the receipt of satisfactory references, stating that the landlord’s solicitor had been instructed to issue a draft licence: see Next plc v National Farmers Union Mutual Insurance Co Ltd [1997] EGCS 181; (iii) correspondence from the landlord’s solicitor confirming “consent in principle”. The fact that the letters sent by the landlord’s solicitor were headed “subject to licence” and imposed conditions did not make the consent equivocal or uncertain: see Aubergine Enterprises Ltd v Lakewood International Ltd [2002] EWCA Civ 177; [2002] 1 WLR 2149; and (iv) an e-mail from the landlord’s solicitor stating that the landlord was prepared “in principle” to consent to the tenant’s application, even though the e-mail purported not to constitute the requisite “consent” and stipulated that the tenant must first enter into a formal licence to assign: see Alchemy Estates Ltd v Astor [2008] EWHC 2675 (Ch). The High Court decided that the agreement for underlease was conditional on obtaining the superior landlord’s consent – and not on the actual completion of the requisite licences. It accepted that the landlord had granted consent on the basis that its decision would exist and be recorded in formal licences. None the less, the existence of the requisite consents could be identified before the completion of the licences without causing unwelcome uncertainty or producing a consent on which parties cannot commercially rely. Practitioners may disagree, on the basis that most landlords and tenants prize the certainty provided by formal licences. However, it is difficult to disagree with the judge’s conclusion that the parties had made the agreement for underlease conditional on obtaining the superior landlord’s consent so that they could withdraw if it was refused – but not as the result of a change of heart. Allyson Colby is a property law consultant
