Real Estate Tip Of The Week: Reasonably Withholding Consent

Reasonably Withholding Consent

Lease covenants that require landlords to act reasonably when tenants seek their consent (known as "fully qualified" covenants) are common. Working out whether the landlord is entitled to withhold consent in these circumstances can however be difficult, particularly when circumstances have changed since the lease was originally drafted.

In the case Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47 the Supreme Court recently considered this point in relation to a property in Soho comprising a ground floor and basement shop with four upper floors. The top two floors had been in residential use since the property was leased in 1986 and the tenant wished to convert the first and second floors to residential use as well. The lease allowed residential use of those floors, but the tenant needed the landlord's consent to apply for planning permission. The landlord refused to give consent on the grounds that doing so would risk the property being enfranchised.

The tenant argued that this was unreasonable and the High Court and Court of Appeal agreed, finding that the landlord could not use the consent requirement in relation to planning permission to effectively restrict the permitted use agreed under the lease. The Supreme Court, however, felt that rigid analysis of the text of the lease itself was the wrong approach...