Tenant's request for consent to assign - Landlords must act quickly
Where a lease has a qualified covenant against assignment (ie it is not permitted without the landlord’s consent) Section 19 of the Landlord and Tenant Act 1927 requires that the landlord’s consent cannot be unreasonably withheld. The Landlord and Tenant Act 1988 added a gloss to this by requiring that where a lease contains such a qualified covenant against alienation, any person whose consent is necessary to a proposed transaction owes the tenant a duty to give his decision within a reasonable time and in writing. Where a landlord wishes to refuse consent his reasons must also be given in writing within a reasonable time.
In the recent case of Go West Limited -v- Spigarolo [2003] EWCA Civ 17 the Court of Appeal had to consider the question of what constitutes the cut-off point at which a tenant was entitled to treat the landlord’s response to his request for an assignment as final.
The lease of business premises in London contained a qualified covenant against assignment. On 13 March 2001 the tenant asked for the landlord’s consent. The landlord refused and, on 30 May, wrote to the tenant giving reasons for its decision. Further correspondence ensued but, in July, the tenant brought proceedings seeking a declaration that the landlord had unreasonably withheld its consent. The High Court had to consider whether the reasonable time allowed to the landlord by the 1998 Act came to an end as a result of the letter of 30th May and whether the landlord had unreasonably withheld consent.
The High Court ruled that by serving the written notice required of him by the 1988 Act, the landlord elected not to rely on any further time as constituting part of the reasonable time that the Act allowed him in which to respond to a tenant’s request. He could not subsequently be heard to say that it was open to him to reconsider the tenant’s application during the remainder of what might otherwise have been a reasonable period. Also, he could not rely on reasons for withholding consent which had not been stated in his original written notice. The landlord had been in breach of his duty under the 1988 Act on 30 May because he had failed within a reasonable time, ie within the time which necessarily expired when the letter was sent on 30 May to give the consent which, had been unreasonably withheld. Nothing that had happened after 30 May had expunged the breach or absolved the landlord from its consequences.
Unless a landlord makes it clear in his letter refusing consent that he is waiting for further information relating to the assignment or some other factor is delaying his final decision, a letter giving refusal will bring the reasonable time allowed under the 1988 Act to an end. The Act presupposes that there is a single date upon which the tenant’s application would be made and from when the reasonable time would run. It did not contemplate a continuing application by the tenant.
The original application by the tenant had been made on 13 March. The court did not comment on whether the landlord’s May response was made within the reasonable period required under the Act. The Act does not specify what constitutes a reasonable period, although there have been a couple of decisions giving some assistance. In a Midland Bank Plc -v- Chart Enterprises Inc [1990] 44 EG 68 a delay of almost 3 months in notifying a tenant of a decision was held to be unreasonable. In Dong Bang Minerva (UK) Limited -v- Davina Limited [1995] 5 EG 162 it was considered that 28 days from receipt of an application and references by a landlord was a reasonable period. The question of reasonableness would depend upon the facts of each case and it would seem that the 7 weeks that it took the landlord here formally to respond was not considered to be unreasonable, and indeed the judgement implied that when the landlord refused consent on 30 May a further period might still have been available within the “reasonable period”.
If you are a landlord and you receive a request for your consent to an assignment or underletting, the 1988 Act imposes a duty on you to give consent within a reasonable time, unless it is reasonable to refuse to do so. It is essential to provide your decision in writing. A telephone response will not suffice.
If you are a tenant, be aware of the landlord’s obligations. Try to provide as much information about the proposed transaction with your initial request as possible so the landlord has no excuse to delay a full and final response.
For further information please contact Caroline Potter on +44 (0)20 7367 2721 or at caroline.potter@cms-cmck.com.
