The Property Protocols website, a source of high-quality, free professional advice covering various aspects of the property industry, recently published a protocol to deal with Applications for Consent to Assign or Sublet. The document is succinct and practical, providing a simple framework for the process of obtaining Landlord's consent. Consent to assign and sublet is necessary in the vast majority of leases and the protocol aims to provide a clear process for both parties to follow, complete with timescales and checklists.
The protocol sets out to clarify an area that is otherwise only bounded by the landlord's 'reasonableness' – which itself would ultimately be for a Court to decide- but long before that point there needs to be a sense of direction and clarity for both parties if the assignment or subletting is to proceed smoothly. The protocol therefore sets out some check-list style points such as the information the tenant is to provide at the outset, what triggers the need for superior landlord's consent and the information the landlord should cover in replying to the application. By the author's admission, the protocol is not exhaustive, but as it is an unenforceable, voluntary procedure it is not designed to be exhaustive; more informative.
In terms of remedies should the process go wrong, the protocol suggests Alternative Dispute Resolution over litigation and proposes a number of ways this might be carried out, including some useful starting points for those looking for a mediator.
It is possible that those most likely to agree to follow the protocol are those least likely to run into difficulties, but having a clear timetable from the outset cannot hinder a transaction. Should one party not wish to follow the protocol there is still no reason why the other couldn't use it for guidance.
Consent to assign and sublet is necessary in the vast majority of leases, the Property Protocols website, a source of high-quality, free professional advice covering various aspects of the property industry, recently published a protocol to deal with Applications for Consent to Assign or Sublet and this article has summarised the key points for landlords as a checklist.
What information should you get in respect of the proposed assignee or undertenant?
- Consider the strength of their business and be prepared to ask for bank statements, accountant's references or proof of three year's profits.
- Is there likely to be a parent company or other guarantor? If so, you will need to ask for the same information for them.
- Get some idea of whether the assignee will want to sub-let or share with another company.
Have you received an application for consent from your tenant? Your best next steps are:
- Acknowledge the application within 5 working days. Use this response to ask for missing information or let the tenant know that you will need time to make your own investigations.
- If you in turn have a landlord to deal with, first, check the terms of your own lease. This should tell you if you need to seek consent from your landlord. If so, it's best practice to pass the application on within 5 working days. If you cannot give consent without your landlord's permission then communicate this to the tenant.
- Give your final decision in writing, and respond with further information on that decision if the tenant asks.
- The key concept for a landlord in all of this is that of 'reasonable' behavior. This is what a Court would look at should a tenant feel their application had been treated unfairly. Every application will be different, but regardless of the complexity, amount of information or urgency, bear in mind that responses should be prompt, balanced and considered.
If the consent process breaks down or goes wrong, consider:
- Alternatives to litigation. Court proceedings are expensive, lengthy and unpredictable. If a tenant feels that they have been treated unfairly they can consider:
- Arbitration by a lawyer. There are specialist arbitrators who can work at resolving such matters. Similarly, an experienced solicitor, barrister or surveyor can be instructed to give an expert decision.
- Mediation. Again, there are specialist firms and independent lawyers who can moderate the disagreement and help both parties to a conclusion.
- Those interested in finding out what can happen when steps are missed could look at E.on UK Plc v Gilesports Ltd. In this case an application for landlord's consent was sent by e-mail from the tenant's solicitors to the landlord's managing agent. The court decided that the request by e-mail was not enough to trigger the landlord's statutory duty to consider the application, as the notice was not served in accordance with the provisions of the tenant's lease. Shortly after providing financial information for the assignee the tenant assigned the lease without the landlord's consent. The assignee was unable to pay rent and the landlord sought to recover it from the tenant on the basis that no consent was given for the assignment.
The tenant argued in court that that the landlord had unreasonably delayed and therefore should be deemed to have consented. This was rejected as notice had not been correctly served and the delay was not so great as to be unreasonable by commercial standards.
- The lesson from this is that it is vital to read and respect the terms of the lease, and that consent to an assignment cannot be taken for granted.