Overturning reasonable grounds for refusal of consent to assign a lease28th October 2016
One unreasonable ground can overturn two reasonable grounds for a refusal of consent to assign a lease.
Where a tenant wishes to assign its lease but needs the consent of the landlord, the law (and often the lease) will prevent a landlord from acting unreasonably. The recent High Court decision in No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd is a reminder to landlords of the need to comply with the provisions of the Landlord and Tenant Act 1988 (“the Act”).
Section 1 of the Act requires a landlord to grant consent to applications, within a reasonable time, unless it is reasonable not to do so. In addition, the Act requires that where consent is granted subject to conditions, those conditions must be reasonable. Section 5(2) of the Act states that an application is considered served if it is served in any manner provided by the lease.
The facts in No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd
East Tower Apartments Ltd (“East Tower”) held 42 long leases of flats in a residential tower block; No. 1 West India Quay (Residential) Ltd (“West India”) was the landlord. The leases were drafted on similar terms. The leases provided that any assignments required the consent of the landlord. In 2015 East Tower made applications to West India for consent to assign some of the leases that it held.
As a result of three of the applications made by East Tower, litigation followed between the two parties. In relation to two of the applications, East Tower sought declarations that West India had unreasonably refused consent. Consent was not granted by West India as East Tower refused to:
1. Provide a bank reference for the proposed assignee;
2. Allow West India to inspect the premises and recover the costs from East Tower (£350 plus VAT); and
3. Provide an undertaking to pay the costs of dealing with the application (£1,600 plus VAT).
In relation to the third application, East Tower sought a declaration that West India did not grant consent within a reasonable time. The tenancy stipulated that for notices to be served they must be “left or sent through the first class post…addressed to the Lessor at its registered office.” However, in 2014 West India sent East Tower a sales pack advising that any application for consent to assign should be sent to a specified address, which was not the registered office of West India.
East Tower complied with the sales pack and sent the application to the specified address. 33 days after the application, East Tower served a further application as the registered office for West India. Consent was granted 14 days after service of the further application.
The High Court decision
Concerning the first two applications, the High Court held that grounds 1 and 2 were reasonable grounds for refusal and that the costs for East Tower in relation to ground 2 were reasonable “in the context of an assignment of a long lease of prime residential property in London.” Despite the High Court finding that grounds 1 and 2 were reasonable, it was held that the amount sought in relation to ground 3 was not a reasonable ground for refusal. As a result, the refusal of consent was unreasonable and East Tower was free to assign the lease without the consent of West India.
In relation to the third application, the High Court held that time only began for the purpose of the Act when East Tower served the application at the registered office for West India and that the information in the sales pack did not amount to an offer by West India to waive the requirements for service set out in the lease. West India had consented within a reasonable amount of time (14 days being held to be reasonable).
Landlords dealing with applications for consent to assign a lease should be aware that if one ground is held to be unreasonable it can overturn the reasonableness of any other grounds for refusal. It is important, therefore, to ensure that all grounds for consent are reasonable and provided in a timely manner.
For further information, please contact the Real Estate Disputes Team at Hamlins.