By Real Estate Solicitor, Ciara McGreevy
The Court of Appeal’s recent judgment in No. 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250 provides clarification for landlords as to what constitutes reasonable refusal of consent on the assignment of a lease.
Background
The tenant purported to sell 42 apartments, each of which were held under 999-year leases. Under the terms of the leases, landlord consent (not to be unreasonably withheld) was required prior to any assignment of same. During negotiations, the landlord imposed three conditions that the tenant ought to adhere to before it would grant consent, namely:
- The provision of an undertaking that the tenant would pay a fee of £1,600 (plus VAT) in order to discharge the landlord’s costs;
- An inspection of the properties to ensure that no breach of covenant had occurred; and
- The provision of bank references for the prospective assignees.
The tenant issued proceedings on the basis that it considered all three conditions unreasonable.
The High Court held that the second and third conditions imposed by the landlord were reasonable in nature. Nevertheless, these conditions were outweighed by the first condition; being the disproportionate costs requested by the landlord. One unreasonable ground for refusing consent was deemed by the Court to mean that the landlord’s refusal overall was unreasonable. The landlord appealed.
The issue for the Court of Appeal to determine was whether one unreasonable condition could, indeed, vitiate the two reasonable conditions imposed by the landlord.
The Judgment
In delivering his judgment, Lewison LJ explained that where the individual reasons for withholding consent were free-standing, each with causative effect, it was sufficient that only one of the grounds was reasonable in order for a landlord to refuse consent. There was no evidence to suggest that the landlord’s request for an excessive fee was the main reason it had refused consent to the assignment. In addition, it could not be said that this one unreasonable condition had vitiated the others. Holding in favour of the landlord, Lewison LJ stated;
”Where, as here, the reasons were free-standing reasons each of which had causative effect, and two of them were reasonable, the decision itself was reasonable.”
Application in Northern Ireland
The courts in West India Quay were guided by the provisions set out in section 1 of the Landlord and Tenant Act 1988 (the ‘‘1988 Act’’) which imposes a statutory duty on landlords in England and Wales to provide consent without attaching unreasonable conditions. Whilst the 1988 Act is not applicable in Northern Ireland, the Court of Appeal’s judgment in West India Quay does serve as persuasive authority in this jurisdiction and should serve as guidance to commercial and residential landlords alike as to what constitutes reasonable grounds for refusal of consent to the assignment of a lease.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.
