One of our previous articles explored whether a landlord was entitled to withhold consent for a tenant assigning or underletting a lease. Since this, case law has developed which may be a welcome decision for landlords. This article will explore a recent case that determines when a Landlord can withhold consent.

No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250

In this matter, a landlord had withheld consent to the assignment of two 999 year leases of residential flats. The High Court (and subsequently the Court of Appeal) looked at whether this was reasonable.

High Court decision

The High Court heard that the landlord refused to grant the tenant consent to assign the lease to a purchaser. This is because the tenant failed to comply with the landlord’s requirements. The conditions (which the tenant failed to comply with) were payment of the landlord’s legal costs and surveyor’s costs, a bank reference for the purchaser and an inspection of the flat.

The Court found that although it was reasonable for the landlord to impose conditions regarding inspection and the bank reference, the legal costs were unreasonable. This meant that demanding payment of costs was not a valid reason for refusing consent. The ill-founded reasons for refusing consent outweighed the fair reasons. Therefore, the High Court held that the landlord had unreasonably withheld consent to assigning the lease.

Court of Appeal decision

The landlord appealed the decision to the Court of Appeal. The Court was not asked to consider whether the conditions were reasonable, but to consider only whether the landlord had acted lawfully when refusing consent on a mixture of reasonable and unreasonable grounds.

The Court of Appeal overturned the High Court decision and founded that the landlord had not unreasonably withheld consent. A common sense approach was taken and it was found that a bad reason will not override a good reason where those reasons are free-standing. Lewison LJ said, ”The theme running through all these cases is that if the decision would have been the same without reliance on the bad reason, then the decision (looked at overall) is good”.

Does this change the position?

The ruling comes as welcome news for landlords as it widens the scope to refuse consent where necessary. If the landlord imposes reasonable conditions and the tenant fails to comply with these conditions, it is reasonable for the landlord to refuse consent to the assignment of the lease.

A landlord is required by the Landlord and Tenant Act 1988 to specify its reasons for withholding consent. In doing so, its duty is to prove that its overall decision was reasonable; not that each of the reasons behind it were reasonable in their own right.