Consents To Assign – One Wrong Invalidates Two Rights

The High Court decision in No.1 West India Quay (Residential) Ltd v. East Tower Apartments Ltd [2016] EWHC 2438 (Ch) is a stark reminder to both landlords and tenants of the need to be aware of and to comply with the provisions of the Landlord and Tenant Act 1988 (1988 Act) when dealing with applications to assign where landlord's consent is not to be unreasonably withheld.

Background

East Tower Apartments Ltd (Tenant) held 42 long leases of flats in a residential tower block at West India Quay. In 2015 the Tenant made a number of applications to its landlord, No. 1 West India Quay (Residential) Ltd (Landlord) for consent to assign some of its leases.

The leases were all drafted on substantially the same terms. Those terms included a requirement for landlord's consent to assignments. As the leases stipulated that the landlord's consent could not be unreasonably withheld the provisions of section 1 of the 1988 Act applied.

Section 1 of the 1988 Act applies (with some exceptions) to both commercial and residential property where landlord's consent is required to an assignment, underletting, charging or parting with possession of premises and that consent cannot be unreasonably withheld. It requires, among other things, that a landlord must, within a reasonable time, grant consent to the application unless it is reasonable not to and further that, where consent is granted subject to conditions, those conditions must be reasonable.

Unfortunately three of the Tenant's applications did not go according to plan and litigation ensued. In respect of two of the disputed applications the Tenant sought declarations that the Landlord had unreasonably refused consent. In relation to the third disputed application the Tenant sought a declaration that the Landlord had failed to grant consent within a reasonable time. The matter reached the High Court on appeal.

Unreasonable refusal of consent

The three grounds the Landlord gave for not consenting to the first two disputed applications were that the Tenant had refused to:

provide a bank reference for the proposed assignee; allow the Landlord to inspect the premises at the Tenant's cost prior to determining the application; and provide an undertaking to cover the Landlord's fees for dealing with the application. On the facts it was decided that the first two grounds were both reasonable. In relation to the bank reference it was difficult to see how such a "requirement could be stigmatised as unreasonable...