Refusing consent to assignment: good reasons and bad reasons

The Court of Appeal recently overturned the decision of the High Court in No.1 West India Quay (Residential) Limited v East Tower Apartments relating to the statutory duty of a landlord to act reasonably in giving their consent to a proposed assignment of a tenant’s lease.

The facts of the case related to residential leasehold property but the legal principles apply equally to commercial leasehold property. In this case, the tenant claimed that the landlord had unreasonably withheld consent to a proposed assignment of their lease in breach of the landlord’s statutory duties under the Landlord and Tenant Act 1988 on the basis that one of the three reasons given by the landlord for the refusal was unreasonable.

The High Court held that on, the facts, the one unreasonable ground given by the landlord effectively poisoned the well of reasonableness and that “in this case the bad reason vitiated the two good ones”.

This tenant-friendly decision was, however, reversed by the Court of Appeal, who disagreed with the High Court. Lord Justice Lewison held that if the other good reasons for a refusal given by the landlord were “free-standing and not dependent” on the bad reason then “there has been no infection of the good by the bad”.

However, Lord Justice Lewison warned against a landlord taking a scattergun approach to giving reasons for a refusal of consent in the hope that one of the good reasons would stick despite various bad reasons. Such an approach, he held, would run the risk that the court would view the points made by the landlord as “not in truth operative reasons at all”.

Nevertheless, the case gives landlords a far greater remit to successfully and reasonably refuse consent to an assignment if they can argue a good reason for a refusal whether or not some bad reasons are given in the mix. Tenants are, therefore, now in a weaker position when it comes to fighting a landlord’s decision on the grounds of the landlord providing unreasonable reasons for a refusal of consent.

It is interesting to note that the one “bad reason” which was the subject of this case was that the landlord insisted on costs for the assignment in the sum of £1,200. The High Court and the Court of Appeal felt that these costs were excessive in the circumstances. However, despite this, asking for costs which may be over the odds was not enough to defeat a refusal.

The silver lining for tenants may be the remarks made by Lord Justice Lewison that in the context of a hypothetical commercial lease assignment a fee of £1,000 may not be reasonable whereas £750 may more likely be reasonable. Landlords who charge extensive legal and surveyor’s fees for assignment applications may take pause after reading this statement. However, without the risk of their refusal being overturned on the basis of any unreasonable fees, it is unlikely that this case will dissuade landlords from charging or increasing fees for applications made by their tenants for licence to assign their lease.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact Paul Jagger