Landlords - Are you being reasonable?!
As a landlord, if a tenant asks for your consent to assign their lease to another party, you’ll normally be under a statutory duty to not unreasonably withhold that consent and to give that consent within a reasonable time. Where there’s a dispute as to whether consent is being unreasonably withheld or delayed, you’d need to prove you’d acted in accordance with these statutory requirements.
So, the question is; what is (or isn’t!) reasonable?
No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd
These statutory duties were considered by the High Court recently in relation to a tenant’s application for consent to assign some long residential underleases. The landlord said that consent was conditional on the following:
- the proposed assignee providing bank references;
- the landlord’s surveyor being permitted to inspect the premises and recover its costs in doing so (£350 plus VAT); and
- the tenant paying the landlord’s ‘administration charge’ in the sum of £1,250 plus VAT.
The tenant agreed to an inspection being carried out, but refused to pay the costs the landlord was demanding.
The High Court decided that the first and second conditions were reasonable. After all, a landlord needs to know a proposed assignee is able to perform its contractual obligations. An inspection of the property was also considered necessary to see whether there had been any breaches of tenant’s repairing and alteration obligations under the lease. In the context of a long lease of a prime residential property, it was also not unreasonable for the landlord to instruct a surveyor to carry out that inspection.
The third condition, however, was not deemed to be a reasonable ground for refusing consent to an assignment. A reasonable fee should be assessed on what would be involved based on the specific facts of the case. In this case, those fees actually outweighed the administrative processes the landlord would actually have to go through.
The fact that the third condition was considered to be unreasonable negated the landlord’s other two (reasonable) reasons for refusing to give its consent. The tenant was therefore free to assign the leases without consent.
The above case, of course, was decided on its specific facts, but this is a good reminder to landlords (and their agents and/or surveyors) to think carefully about what conditions are to be imposed following a tenant’s application for consent to an assignment or underletting, and whether such conditions are reasonable or not.
You may want to have a look at the ‘Alienation Protocol’ which provides good tips and guidance for landlords on how to properly manage the process when such application is made by a tenant.
For more information on this contact our Real Estate team on 0345 070 6000.