Most commercial leases contain a provision that the tenant can only assign or sub let their interest with the consent of the landlord and that such consent is not to be unreasonably withheld. The key question for the landlord is what is considered reasonable? Landlords do have to be careful when exercising this judgment. Get it wrong and the landlord might face an application to the court by the tenant asking the court to get the decision right and to order that the landlord pays damages for losses sustained as a result of any unreasonable refusal to consent to an assignment on the part of the landlord.
Section 1 of the Landlord and Tenant Act 1988 gives guidance to landlords as to how they should respond to a tenant’s request for consent and how they should deal with the issue in a reasonable manor. Some of the pointers in this statute are:
- When asked by the tenant, in writing, to consent to a transaction the landlord is under an obligation to reply within a reasonable time. This is likely to be on the time scale of a few weeks rather than a few months;
- If the landlord withholds consent, they must give their reasons for withholding;
- Any conditions which the landlord seeks to attach to the consent must be reasonable.
The recent case of Singh v Dhanji and Another (2014) EWCA Civ 414 is a cautionary tale for landlords. Mr Singh, a dentist, let one of his properties out to Mrs Dhanji. Mrs Dhanji wrote to Mr Singh to apply for consent to assign the lease to a proposed purchaser. In response to this Mr Singh wrote back complaining of breaches of the lease and stating that until these breaches were resolved he would not agree to an assignment. However, Mrs Dhanji denied the breaches and stated that even if the breaches were proven they were so minor it would make a refusal to consent to the assignment unreasonable. Mr Singh would not agree to this statement and as a result Mrs Dhanji took court proceedings on the matter. The court decided that the alleged breaches were not proven. They further specified that if the breaches had been proven they were not serious enough to have made a refusal to consent based upon them being reasonable.
As a result of this case we can see that landlords need to tread carefully before refusing to give consent to an assignment or subletting in order to avoid court proceedings, which can cost the landlord valuable time and money.
If you have any issues regarding assignment or subletting of a lease please contact a member of our Dispute Resolution team, on 0161 475 7676.