Beware All Landlords – Are You Being Unreasonable?

Leases typically contain a restriction preventing the tenant from assigning the lease to a new tenant without the landlord's prior consent. That restriction is usually subject to a qualification that the landlord should not unreasonably withhold its consent.

The difficulty facing landlords is that they are also under a statutory duty (by virtue of the Landlord and Tenant Act 1988 ("the 1988 Act")) to give consent within a reasonable time (unless it is reasonable not to give consent). Where the consent is made conditional, any condition must also be reasonable and, if challenged, the onus falls on the landlord to show that it is reasonable.

In the recent case of No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2016] EWHC 2438 (Ch), the High Court considered what terms may be reasonable when giving conditional consent to an assignment. Whilst the case concerns residential property, it has wider reaching application, with commercial landlords and tenants also being affected by the decision.

Background

East Tower Apartments Ltd ("ETAL") was a tenant under long leases of residential apartments at No 1 West India Quay, London ("the Building"). The leases contained the usual provision that landlord's consent to any assignment was not to be unreasonably withheld .

ETAL challenged not only the refusal of its landlord, No.1 West India Quay (Residential) Ltd ("West India Quay"), to consent to the proposed assignments of two of its apartments in the Building but also West India Quay's response time for granting consent on a third apartment.

The county court judge found that West India Quay had not delayed in dealing with ETAL's application for consent. However, West India Quay appealed to the High Court against the court's further decision that it had unreasonably withheld its consent and was in breach of the 1988 Act.

West India Quay had given three grounds for withholding its consent:

ETAL's refusal to give a bank reference (West India Quay wanted to assess the prospective assignee's covenant strength) ("Precondition One"). ETAL's refusal to allow West India Quay's surveyor to inspect the apartments at ETAL's cost (prior to making its decision) to check for breaches of the leases ("Precondition Two"). ETAL's refusal to give an undertaking for West India Quay's costs of £1,600 plus VAT for dealing with the application for consent and for the surveyor's inspection ("Precondition Three"). The High Court found that West India Quay's...