Applications for consent to alterations can be refused by a landlord only on “reasonable” grounds. Two cases illustrate the nature of that tricky concept
Key points ? An application for consent to alterations must explicitly deal with how potential structural problems will be addressed ? Consent to alterations can reasonably be refused where the use to which the altered premises will be put will affect the landlord’s property interests |
Case law on applications for consent to alterations is very thin on the ground. Thus, practitioners will be pleased to learn of two rulings in this area: Iqbal v Thakrar [2004] EWCA Civ 592 and Sargeant v Macepark (Whittlebury) Ltd [2004] EWHC 1333 (Ch).
Where a tenant’s proposed alterations amount to improvements (and, for a tenant, they invariably do), and can be carried out only with the landlord’s consent, section 19(2) of the Landlord and Tenant Act 1927 requires that consent not to be unreasonably withheld. In contrast to the position on dispositions, the fact that the proposed improvement would diminish the value of either the demised premises or the landlord’s adjoining property does not entitle the landlord to refuse consent. In those circumstances, it can simply require the payment of compensation.
Structural concerns in Iqbal
In Iqbal, the tenant sought consent to convert its ground-floor premises into a restaurant. The landlord, which was developing the upper parts of the building into 10 flats, refused its consent. The trial judge held that this refusal was unreasonable, and the landlord subsequently appealed.
The landlord’s primary objection was that the works could destabilise load-bearing parts of the structure in a way that might affect the upper parts of the building. The tenant’s proposal to put a new door into the front wall was absolutely rejected. The trial judge had concluded that, because the tenant’s plans showed that existing load-bearing walls and pillars were to be checked on site before work was begun, and that no reputable builder would remove such structures, this ground of refusal was unreasonable. She also ruled that, because the lease expressly included the “shop front”, this included the front wall. Accordingly, the landlord could refuse consent to the insertion of a door only upon reasonable grounds.
The Court of Appeal set out the legal principles governing consents to alterations. This checklist, which is heavily derived from the case law on consent to dispositions, includes three points that proved key in both Iqbal and Macepark, namely that: (i) a landlord cannot refuse consent to alterations on grounds that are unrelated to its property interests; (ii) a refusal can reasonably be based upon the use to which the altered premises are to be put (although where such a use is permitted under the lease, much will depend upon the particular circumstances of the case); and (iii) consent cannot be refused on grounds of pecuniary loss alone — here, the landlord must give consent, although it is entitled to seek compensation.
The court decided that the ruling of the trial judge could not be upheld. It was quite wrong to suggest that where an application leaves the landlord with proper concerns about the structural integrity of its building, it should give its consent subject to conditions covering those concerns. It was for the tenant, in its application, to make clear to the landlord how any structural problems would be dealt with. Unless this were done satisfactorily, the landlord would be entitled to refuse consent. The court also decided that, on a proper construction of the lease, the expression “shop front” did not extend beyond the façade. Thus, the main wall remained the landlord’s property and it was entitled to refuse consent without reference to reasonableness.
Competitive streak in Macepark
The claimants in this case owned a golf-course complex and had leased out part of the land to the defendant on terms that required it to erect an hotel. Since the claimants’ existing business included corporate hospitality (and, in particular, wedding receptions) and that of the defendant comprised a large element of conference hospitality, the lease provided that neither would use their respective premises to take business from the other.
Difficulties subsequently arose between the parties over their competing business interests. When the defendant wanted to build an extension (for which the claimants’ consent was required), the latter sought to impose a condition requiring the public rooms to be used only for functions and activities directly related to the management training conferences that were held at the premises. This was designed to prevent the extension from being used for weddings and wedding receptions.
A key question was whether a landlord is entitled to refuse consent to an alteration the use of which may adversely affect its own trading interests on other nearby property. Having examined the authorities on dispositions and change of use, Lewison J was satisfied that no principle of law prevented a refusal on such grounds from being reasonable, and he saw no reason why this did not apply equally to alterations, especially given the view in Iqbal that the use to which alterations are put can found a reasonable refusal.
If allowed to, the defendant would use the extension to compete with the claimants’ wedding business. Given the terms of the lease governing the parties’ business activities, this would not simply affect the claimants’ pecuniary interests but also their property interests. However, it would not justify an outright refusal of consent to the alterations. The detailed wording of the condition put forward for the judge’s approval went too far: it would prevent the defendant from carrying out activities that were part of its business and that were not precluded under the terms of the lease. Hence, a condition protecting the landlord’s business could be reasonable; the one actually proposed was not.
Sandi Murdoch, senior lecturer in law, Reading University
