Leaseholders who enfranchise in an area that is subject to an estate management scheme, made under the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993, may find that their former landlords are still entitled to exercise some management control over them.
Constance Long Term Holdings Ltd v Duke of Westminster [2012] EWHC 3434 (TCC) concerned the Grosvenor Belgravia Estate Management Scheme, which was established to maintain adequate standards of appearance and amenity and to regulate redevelopment in the area. The company asked for permission to carry out two alternative schemes. One involved the construction of a deep subterranean basement with a piled wall around the perimeter of the house and the back garden. Alternatively, the company sought permission for a lesser scheme, which included piling work that would enable it to construct the basement in the future.
The estate refused consent for the piling work, which led to proceedings in which the company sought declarations that the estate had unreasonably refused, withheld or delayed consent to the piling work and that it was entitled to proceed with the work without the estate’s permission. The High Court applied the principles used to establish whether a landlord has unreasonably refused to grant a licence for alterations to a tenant, which were summarised in Iqbal v Thakrar [2004] EWCA Civ 592; [2004] 3 EGLR 21.
The landlord was entitled to protect itself from alterations that would damage its property interests and need only consider its own interests, unless it would be disproportionate to do so. The landlord was not entitled to refuse consent on grounds that had nothing to do with its property interests, nor was it entitled to refuse consent on the grounds of pecuniary loss alone.
It was up to the tenant to make its proposals sufficiently clear to enable the landlord to reach a decision. It was a question of fact whether the landlord had acted reasonably or not. It was not necessary for the landlord to prove that the conclusions that led it to refuse consent were justified, if they were conclusions that might have been reached by a reasonable landlord in the particular circumstances. It might be reasonable for a landlord to refuse consent even though the tenant intended to use the premises for purposes that were permitted by the lease and it was up to the tenant to show that the landlord had acted unreasonably.
What were the estate’s reasons for refusing consent for the piling? Were its reasons reasonable or not, and what would the position be if it had both good and bad reasons for refusing to permit the piling work? The judge ruled that he would have been unable to ignore a bad reason if either it was by far the most important reason for the estate’s decision, and the purportedly good reasons were merely makeweights, or the existence of the bad reason had infected or vitiated what would otherwise have been good reasons. However, this was not the case here.
The estate had refused to permit piling work that was unnecessary and would cause significant additional disruption to neighbours. The decision fell within the band of possible decisions that a reasonable body of estate governors could reach and the estate had not unreasonably refused permission for the work.
Allyson Colby, property law consultant
