No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd (2016) [2016] EWHC 2438 (Ch)

The case concerned long underleases of three residential apartments. The tenant sought a declaration that the landlord had unreasonably delayed its consent to assign the lease of one and had unreasonably withheld its consent to assign the other two.

In relation to the first apartment, an initial application for consent was sent to an address notified by the landlord for service of applications, rather than to its registered office as required by the lease. A second application was sent to the registered office over 30 days after the first request. The landlord granted consent 47 days after first “application” and 14 days after the second.

In relation to the other two apartments, the reasons given by the landlord for the refusal of consent were that the tenant had: i) refused to provide bank references for the prospective assignees; ii) challenged the landlord’s request for prior inspection by a surveyor, at a cost of £350 plus VAT; and iii) refused to give an undertaking in respect of the landlord’s fees of £1,250 plus VAT.

The judge found in favour of the tenant and the landlord appealed. On appeal, it was held that:

Apartment 1:

  • a formal request in accordance with the Landlord and Tenant Act 1988 had not been made by the tenant until its second request (served at the landlord’s registered office). Granting consent 14 days after a formal request was within a reasonable time;

Apartment 2 and 3:

  • a bank reference would have been simple and inexpensive to provide and could not be regarded as an onerous requirement;
  • it was not unreasonable for the landlord to instruct a surveyor at a cost of £350 plus VAT to check whether repairing and alterations covenants had been complied with;
  • the requirement for consent was not to be treated by the landlord as an opportunity to charge a fee unrelated to the costs of the routine enquiries/tasks. The judge had been entitled to conclude that a fee of £1,250 plus VAT was unreasonable; and
  • the landlord’s success on the first two issues was not enough to render the refusal of consent reasonable, as there was no reason to conclude that the landlord would have modified its position on fees if the tenant had in fact provided bank references and paid for inspection. Correspondence showed that it would still have insisted on an undertaking for an unreasonable sum of £1,250 plus VAT.

Key points:

  • Landlord’s need to exercise caution when imposing conditions upon a tenant. The general rule is that if a landlord has a “good” reason and a “bad” reason to withhold consent, refusal will be reasonable as long as the good is sufficient and the bad doesn’t vitiate the good. Here, the landlord’s success on its good reasons for refusal - the bank reference and inspection issues - was not sufficient to render its overall decision to refuse consent as reasonable. The bad reason vitiated the good.
  • The decision also highlights the importance of observing the service of notice provisions in the lease and the 1988 Act and acts as a reminder that time will not start to run on the landlord’s statutory obligations until it has been properly served.