Consent to assignment

9 July, 2014
by: Cripps

A recent Court of Appeal case highlights that landlords must have strong grounds in order to refuse a tenant’s application to assign a lease.

The case in question, Singh v Dhanji [2014] EWCA Civ 414, concerned the assignment of the lease of a dental practice in Nottingham.

In this case the landlord let the premises for a 15 year term from 10 March 2000.  The landlord noticed in December 2006 that the tenant had extensively refurbished the premises.  The refurbishment works were carried out in 2004 at cost of approximately £140k and involved the relocation of two partition walls, the removal of the suspended ceiling and the replacement of dental chairs, sinks and flooring.  The tenant did not tell the landlord about these works.

In July 2007, the tenant applied for consent to assign the lease to another dentist.  The landlord refused to consent to the assignment until the tenant satisfied certain conditions.  These conditions required the tenant to remedy the breaches of the covenants the landlord alleged arose from the refurbishment works.  The tenant denied the breaches and asserted that even if the breaches complained of were genuine, they were of such a minor nature that they should not adversely affect the value of the landlord’s interest in the premises.  The battle lines were therefore drawn and the case went to court.

The lease contained the standard restriction in commercial leases on assigning the lease without consent (such consent not to be unreasonably withheld).  As a result, the lease imposed the duties on the landlord set out in section 1 of the Landlord and Tenant Act 1988 (“1988 Act”).  These duties essentially require the landlord:

• to give consent (except where it is reasonable not to do so);

• to give consent within a reasonable time; and

• to serve the tenant with written notice of the landlord’s decision specifying any conditions or reasons for withholding consent.

The 1988 Act also specifically provides that the burden of showing that the conditions of the consent were reasonable falls on the landlord.  Whether or not the landlord has unreasonably withheld consent will involve a consideration of the nature and gravity of the breach.

The trial judge held that the alleged breaches were not proven by the landlord, and that even if the breaches were genuine, they were not serious enough to justify imposing a condition that they are remedied prior to the landlord consenting to the assignment.  The landlord had therefore breached his duties to consent to the assignment under the 1988 Act, and the trial judge awarded damages to the tenant.

The landlord appealed to the Court of Appeal but in March this year the Court of Appeal dismissed the appeal on the basis that they could find nothing in the trial judge’s findings which they should interfere with.  The Court of Appeal noted that the landlord had raised no objection to the identity of the proposed assignee, and that the breaches, even if they were proved, were either of a trivial and minor nature or could be taken up with the proposed assignee.

The decision will be welcomed by tenants as it shows that breaches of a lease that are easily remediable are unlikely to constitute sufficient grounds for a landlord to withhold consent.

 

 

 

Reviewed in 2015