The recent case of Minerva (Wandsworth) Limited v Greenland Ram (London) Limited highlights the importance of carefully considering circumstances in which withholding consent may be reasonable.
A sale agreement provided for an overage payment in the event of enhanced planning permission ("EPP") being granted which increased the floor area of a development. The agreement stated that it was the intention of the parties to seek EPP but the Buyer's approval (not to be unreasonably withheld) was required.
EPP was granted which added two additional storeys to the development by reducing the ceiling height and the space between the floors. The Buyer expressed concerns regarding the reduced ceiling height and withheld approval. In response, the Seller provided expert evidence that the market value and marketability of the development would not be adversely affected by the proposal. The expert confirmed that build costs would increase but the overall cost per square foot would be reduced and there would be a significant increase to the overall development value.
The Buyer argued that it needed time to properly assess the proposals and obtain its own expert opinion, however, the agreement deemed the Buyer's approval unless consent was reasonably withheld or given within 10 working days. The Buyer was unable to provide compelling reasons for withholding consent and had not acted in accordance with the expressed intention in the agreement to co-operate in obtaining EPP. The agreement did not permit further time for the Buyer to investigate the proposals and obtain independent expert analysis. The Buyer's refusal to approve the EPP in these circumstances was not reasonable and damages were awarded to the Seller.
The case provides a useful reminder to parties entering into agreements with continuing obligations to co-operate and act reasonably in relation to any consent that may be required and to include specific drafting, such as a period of time to consider complex applications, where required.