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Case law: Landlord's bad reason for refusing consent to assignment of lease made refusal unreasonable despite his other good reasons

Landlords who give multiple reasons for refusing to consent to an assignment of a lease should ensure all the reasons are reasonable, or that there is evidence that each reason is separate from the others, or they risk the refusal being treated as unreasonable.

Legal Alert

This update was published in Legal Alert - December 2016

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

Please note: A newer article on this case was published in the April 2018 edition of Legal Alert following subsequent developments in the legal process.

A tenant wanted to assign (sell) its leasehold interests in several flats. The leases required the landlord to consent, but consent was not to be unreasonably withheld. The landlord refused consent to two of the assignments on three grounds:

  • Failure to provide a satisfactory bank reference
  • Refusal to allow inspection by the landlord's surveyor and pay the surveyor's reasonable costs
  • Refuse to pay the landlord's (in-house) legal fees of £1,250 plus VAT

The tenant claimed that consent had been unreasonably withheld.

The High Court found that the first two reasons were valid, but the third was not as the legal work required was merely administrative and a fee of £1,250 was excessive and unreasonable. The landlord claimed that the third reason was separate from the other two reasons so it could still rely on the first two reasons to refuse consent.

The High Court found that correspondence between the landlord and tenant did not support this claim. For example, it gave no indication that the landlord would have given consent to the assignment had the tenant provided a bank reference, allowed the surveyor in and paid his costs.

The bad reason therefore vitiated the two good reasons, and the refusal of consent was unreasonable.

Operative date

  • Now

Recommendations

  • Landlords who give multiple reasons for refusing to consent to an assignment of a lease should ensure all of them are reasonable, or that there is evidence that each reason is separate from the others, or they risk the bad reason vitiating the others such that the refusal is unreasonable and can be challenged

Case ref: No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2016] EWHC 2438

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.