In the current difficult market conditions for property transactions, it seems appropriate to remind those involved in disposals of leases that there is an important statutory obligation imposed where a landlord is asked to give consent to a dealing. The landlord who fails to comply with this statutory obligation may face civil proceedings for a claim in damages.
The Landlord and Tenant Act 1988 imposes on the landlord a duty to the tenant within a reasonable time:
- To give consent (except in the case where it is reasonable not to give consent).
- To serve on the tenant a written notice of the landlord’s decision whether or not to give consent.
- Specify if the consent is given subject to conditions, those conditions and if consent is withheld then the reasons for withholding it.
Giving consent subject to any condition that is not a reasonable condition does not satisfy the statutory duty. This duty applies where a tenant seeks consent to a dealing – assigning, underletting, charging or parting with possession of the premises - where the lease provides that the consent of the landlord is needed but that that consent is not to be unreasonably withheld.
A recent case
A recently decided case related to a contract signed and a 10% deposit paid. The prospective assignee who required landlord’s consent for the proposed acquisition of a lease had originally sued the landlord for a declaration that he was unreasonably withholding consent. The assignee lost. In different court proceedings between that assignee and his assignor, the current tenant, the Court of Appeal has now decided that the landlord had tried to impose an unreasonable condition on his consent. The result was that the assignee was entitled to rescind the contract and to the return of his deposit.
What the decision does not do is indicate what the assignor, as tenant, should or could now do, given that the Court of Appeal has decided that the landlord had unreasonably withheld his consent. That would appear to be a breach of statutory duty and the tenant could seek damages against the landlord.
The landlord must:
- Consent within a reasonable time, imposing reasonable conditions if considered appropriate; or
- Refuse consent where it is reasonable to do so; and
- Confirm the decision in writing.
The tenant must:
- Apply for consent as quickly as possible, providing the landlord with information relating to the transaction, and the status of the assignee in particular, so as to provide the landlord with sufficient information on which the landlord can reasonably make a decision.
- Encourage the landlord to respond speedily to the application, reminding the landlord, where necessary, of the landlord’s statutory obligations.
- Consider proceedings against the landlord if consent is delayed, made subject to unreasonable conditions or refused.
The prospective assignee must:
- Provide the current tenant with financial and other information appropriate for the tenant’s application for consent.
- Consider, in advance of exchanging contracts, what guarantee or rent deposit security the assignee may need to provide to obtain consent and what the assignee would consider onerous, ensuring the contract has an appropriate term providing that the assignee need not give any security which it considers inappropriate.
- Consider carefully the contract provision relating to rescission of the contract if consent is not obtained quickly.