Landlord’s consent: what happens when it goes wrong?
The issue of consent more so with regards to private property ownership and possession is dependent on the owner’s consent. Without consent, any action by another party can be viewed as trespass. Historically, the landlord has been perceived to have a more superior position. As such, the tenant could not do anything with regards to the property without the permission of the landlord (Old Monk Co plc v Puzzle Pub [2004] EWHC 3457 (Ch)).
Consent as defined in British Telecommunications Ltd v Rail Safety and Standards Board Ltd [2011] All ER (D) 290 to mean permission in principle rather than the formal completion of permits; the phrasing of the clause reveals that consent to the license is required but not that a license is required for the consent to exist. Agreement clarity is critical, and draftsmen will almost certainly revise their documents in light of this ruling. As earlier stated, the tenant was frequently confined to continue with the disposition, thus calling the landlord’s bluff and expecting that if the issue went to court, the landlord would be unable to justify the reasonableness of his rejection. Alternatively, the tenant has attempted to break the impasse by petitioning the court for a ruling that the landlord is unreasonable in withholding his approval. Both courses had significant downsides (Covington Jr, 1930, 457).
The first option carries a high level of risk because; the tenant often has no idea whether the landlord will be able to justify his refusal, and the burden of proof of unreasonableness has previously been on the tenants (Shanley v Ward [1913] 29 TLR 714). Secondly, most potential assignees would be sufficiently discouraged by the absence of the landlord’s consent to wish to proceed with the transaction in any case. Again, on a request to the court for a declaration, the would-be assignee frequently does not want to become involved in a time-consuming and potentially costly evaluation of the reasonableness of the landlord’s rejection.
A landlord’s interest in the property will be assigned automatically when there is a transfer in the property. Consequently, the issue of consent depends on the type of agreement the landlord and tenant have entered. In this regard, there are qualified contracts or absolute contracts. A qualified lease is one where any changes to the lease or the nature of the property require the landlord’s consent. This implies that the landlord’s consent cannot be withheld unreasonably (Gill, 2005, 15). An absolute covenant is one where the tenant is prohibited from assigning, subletting, or alteration without the landlord’s consent.
In the case of a leasehold or a freehold, the party with the title to the property in this case the landlord has full rights over the property. Tenants on the property with rights emanating from the lease (Allied Dunbar Assurance Plc v Homebase Ltd: ChD 26 Apr 2001). Consent is also important as it allows the tenant to act only within the remit of allowance granted to him/her by the landlord. For example, if the tenant agrees not to assign, sublease, or otherwise part with ownership of the premises, the landlord may not be obliged to provide assent, regardless of how irrational the refusal is (CH Bailey Ltd v Memorial Enterprises Ltd [1974] 1 All ER 1003).
Of course, the landlord may, on the one hand, waive the total restriction, on the other hand. If the renter agrees not to assign or sublet, if a tenant subleases the property without the landlord’s permission, he/she violates Section 19(1)(a) of the Landlord and Tenant Act. According to the Tenant Act of 1927, the landlord may not refuse permission unreasonably (Rendall v Roberts and Stacey (1960) 175 EG 265.). Thus, presenting an evident situation where the landlord’s consent could go wrong. According to Shaw, this also presents a lacuna in the existing law. Ensuring a balance between the landlord’s rights over the property and protecting the tenant from unreasonable denial of consent.
To resolve this, the weight of the burden of showing unreasonable rejection falls on the tenant. However, as was held in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, if the renter asks for a lease, in writing for the landlord’s approval, the landlord has a statutory responsibility to decide within a reasonable time following the tenant’s application. This is perhaps a somewhat controversial area in the law. Landlord’s consent is required in three key situations (Levin, 1980, 123). First to carry out searches (Aquis Estates Ltd v Minton [1975] 1 WLR 1452,), next to alter the premises, and thirdly to assign or reassign possession or ownership (Aberfoyle Plantations Ltd v Cheng [1960] AC 115). Such situations arise in qualified types of contracts where the actions of the tenant require the landlord’s permission and the fully qualified contracts. Here, the tenant cannot carry out the actions above without the landlord’s consent but such consent cannot be withheld unreasonably (Saltz., 2007, 43).
While section 19 of the 1927 Landlord and Tenant Act, subjected those covenants that prohibited dispositions without the landlord’s approval to the proviso that such consent may not be withheld unreasonably, so transforming all qualifying covenants into fully qualified covenants, with the evolution of law, the tenant faced serious limits in terms of the procedural measures available for restraining the landlord’s arbitrary or unreasonable behavior.
Another area where the landlord’s consent could go wrong is with regards to the reasonableness standard. In Premier Rinks Ltd v Amalgamated Cinematograph Theatres Ltd (1912) WN 157, the court noted that the issue of reasonableness and the appropriate standard was a difficult question to determine. Without a concrete standard on reasonableness, the tenant could be mistaken as to the options available to him/her. Another possible eventuality on the part of the tenant is that he/she cannot assess the possible damages for unreasonableness. To resolve this, courts have looked at looking at the circumstances of the case and not a strict rule (Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59). Court’s have, however, listed down circumstances where the landlord can withhold consent where the property is used in a manner that was not used in the manner contracted for and where the tenant wants to achieve a collateral benefit.
Consequently, this presents another area where consent may go wrong. As such, attempts to make define reasonable would lead to confusion. Additionally, there is confusion as to whether consent would still be required for non-binding terms (Goldstein v Sanders [1915] 1 Ch 549). Where there are too many uncertainties in terms of the provisions of the contract, would discourage parties from fulfilling their obligations. Moreover, withholding consent requires the landlord to give sufficient notice. Sufficient notice will depend on the terms of the lease. Here the notice must be given in a reasonable time and must be clear and precise. Unreasonable delay in granting of consent can also be viewed as a lack of proper notice (Footwear Corporation Ltd. v. Amplight Properties Ltd. [1999] 1 WLR 551; Norwich Union Life Insurance Society v. Shopmoor Ltd. [1999] 1 W.L.R. 531) A possible issue could be the timing of service. This should be considered carefully, as an ambiguous or vague notice will lead to misrepresentation and or mistake.
Where some leases lack a time limit stated in the lease, the tenants may be disadvantaged. Vivien King argues that if the tenant’s counsel is clever, he or she will make sure that there is a time limit within which the landlord may serve its notice to conduct reinstatement works (King, 2018, 157). However, a common clause necessitates the landlord to serve its notice before the start of the last three months of the lease. In other words, the landlord cannot serve a notice requiring reinstatement works to be conducted within the last three months of the term. This is advantageous to the tenant as it knows what works are required of it before the lease-end. Sadly, many leases have no time limit and the unfortunate tenant has no idea if it will be required to conduct reinstatement works (Wach, 1993, 680). The only rule is that the landlord must give its notice within the lease term but could, for instance, serve it just before the lease expires thus leaving the tenant no time in which to conduct the works and facing a claim for damages for failure to comply with a reinstatement requirement (Raja v Aviram [2016] UKUT 102).
A potential problem may occur if there is a sub-lease. Mid-landlord is both a landlord and a renter in this scenario. If the mid-landlord distributes interests in the head lease to the tenants, the assignee becomes the mid-landlord of the sub-tenant as a result of the assignment. This creates an evident issue in terms of who’s consent matters. When such a problem arises, the original contract’s duties will eventually bind the mid-landlord. It will eventually depend on the nature of the contract and the terms of the lease.
References list
Literary Sources
King V., 2018. Altering the Demise? Then Get Consent! CSR., 10, 151.
Levin, M.S., 1980. Withholding Consent to Assignment: The Changing Rights of the Commercial Landlord. DePaul L. Rev., 30, p.109.
Wach, M., 1993. Withholding Consent to Alienate: If Your Landlord Is in a Bad Mood, Can He Prevent You from Alienating Your Lease? Duke Law Journal, 43(3), pp.671-701.
Saltz, S.G., 2007. Landlord Impediments to Subleasing and Assignment Issues with Landlord’s Consent. Prob. & Prop., 21, p.36.
Covington Jr, W.T., 1930. Landlord and Tenant-Effect of Consent to One Assignment of Lease on Condition Not to Assign-Dumpor’s Case. NCL Rev., 9, p.455.
Cases
Footwear Corporation Ltd. v. Amplight Properties Ltd. [1999] 1 WLR 551
Norwich Union Life Insurance Society v. Shopmoor Ltd. [1999] 1 W.L.R. 531
Raja v Aviram [2016] UKUT 102.
CH Bailey Ltd v Memorial Enterprises Ltd [1974] 1 All ER 1003.
Premier Rinks Ltd v Amalgamated Cinematograph Theatres Ltd (1912) WN 157.
Goldstein v Sanders [1915] 1 Ch 549.
Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59.
Rendall v Roberts and Stacey (1960) 175 EG 265.
Aquis Estates Ltd v Minton [1975] 1 WLR 1452.
Aberfoyle Plantations Ltd v Cheng [1960] AC 115.
Old Monk Co plc v Puzzle Pub [2004] EWHC 3457 (Ch)).
British Telecommunications Ltd v Rail Safety and Standards Board Ltd [2011] All ER (D) 290.
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