The requirement for landlord’s consent to the assignment of a lease is a condition subsequent. There is an immediate binding contract for sale when contracts are exchanged but an immediate right of termination if the condition is not performed. One or both parties are obliged to use their best endeavours to fulfil the condition.
The High Court has considered the impact of such a condition in Valbonne Estates Ltd v United Homes Ltd [2024] EWHC 876 (Ch).
The case concerned the leasehold interest in the Beckton Arms in London E16, the freeholder of which was the London Borough of Newham. By a contract of sale of 14 January 2015, Cityvalue Estates Ltd agreed to sell the property to the claimant for £495,000, with completion on 27 February 2015. The agreement was subject to Newham’s written consent to the sale and there was a right to rescind if the consent was not provided by 31 December 2015.
Owing to difficulties in obtaining Newham’s consent, the purchase was not completed and issues arose both as to whether the contract had been rescinded and whether Cityvalue had used its best endeavours to obtain Newham’s consent. The companies – owned by members of the ultra-orthodox Jewish community in north London – agreed in 2018 to settle their dispute by arbitration before the Beth Din of the Union of Orthodox Hebrew Congregations, which concluded in October 2020 that the claimant was entitled to complete the purchase within 28 days. It subsequently directed Valbonne to pay to it £500,000 and Cityvalue to deliver a TR1 transferring the property to Valbonne.
During the Beth Din proceedings it became apparent that, in 2017, Cityvalue had entered into an option agreement with the defendant for it to purchase the property for a higher sum. On 4 November 2020, Cityvalue transferred the property to UHL for £1.1m.
Valbonne contended that Cityvalue held the property on constructive trust for Valbonne, as did both UHL and the current owner. Together, the Beth Din awards constituted an order for specific performance. UHL sought to strike out the claim.
Valbonne needed to be able to establish at trial that specific performance would have been granted at 4 November 2020. Neither party had referred the court to authority as to how the court was to retrospectively carry out that enquiry. The court could not be satisfied that Valbonne had no realistic prospect of establishing at trial that specific performance would have been available and was reluctant to determine on a summary basis an involved question of fact when there was uncertainty surrounding the applicable legal test.
Louise Clark is a property law consultant and mediator
