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Case law: Landlord’s refusal to consent to tenant’s planning application not unreasonable, even though lease allowed the use applied for

Landlords asked to give consent to a tenant’s planning application may be entitled to refuse consent, even when the lease allows the proposed use applied for, if the application increases the risk of the tenant using enfranchisement laws to compulsorily acquire the freehold.

December 2019

This update was published in Legal Alert - December 2019

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.

The tenant of a five-storey property plus basement applied for the landlord’s consent to making a planning application (as required by the lease) to convert the first and second floors from office to residential use.

The top two floors already had planning permission for residential use, while the basement and ground floor were used for retail purposes, so a successful application would mean the proportion of the property that was residential would increase from around 25%to around 52%.

The lease said consent to making a planning application was not to be unreasonably withheld.

The landlord argued that a requirement for consent in a lease was to protect landlords from damage to their interest in the property being let. It said it was reasonable for it to refuse consent in the circumstances because it would increase the threat of the tenant applying to compulsorily purchase the freehold of the property under tenant enfranchisement laws, and this would:

  • affect the value of the property;
  • take away its ownership of the freehold if exercised; and
  • would compromise its ability to efficiently manage the overall portfolio of properties it owned, which included adjacent/neighbouring/nearby properties.

The tenant argued that a refusal of consent was unreasonable because the lease specifically allowed a tenant to use the premises for (among other things) residential use. To refuse consent would be curtailing that entitlement.

The Supreme Court agreed with the landlord. It said the risk of the tenant compulsorily purchasing the property enfranchisement was a ‘quintessential type of consideration rendering reasonable the refusal of consent’, and the fact the lease permitted residential use of the property did not override the landlord’s ability to refuse consent in the circumstances.

Operative date

  • Now

Recommendation

  • Landlords asked to give consent to a tenant’s planning application can be entitled to take into account the increased risk of the tenant applying to compulsorily acquire their freehold when deciding whether or not to consent.

Case law: Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47

 

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