When is a landlord within reason to withhold consent?
The parameters in which a landlord is reasonable to withhold consent are similar in which the “reasonable period” is decided – meaning that each case will have to be decided based on certain facts. There are however a few principles which can be referred to as guidelines.
- A landlord cannot refuse consent to an assignment or underletting agreement on grounds that are irrelevant to the subject matter of the lease and have no bearing on the landlord/tenant relationship.
- A landlord can refuse consent or impose conditions in cases where it is necessary to protect the landlord’s existing rights and interest in the property in question.
- A landlord is allowed and entitled to take into account their property interests as a whole when refusing consent. This could be due to estate management reasons etc.
- A landlord is entitled to be satisfied that the new tenant in question can indeed pay the rent and comply with all covenants on the assignment in question. This particular condition is relevant in cases where there is disrepair. The landlord may base their decision on whether or not extra security, guarantees and rent deposits may be required.
- The proposed tenant’s financial standing is of less concern when regarding a sub-letting.
- A landlord with a wide portfolio of units is entitled to base their decision on the type of business the proposed new tenant is running and whether or not this is appropriate based on their tenant mix policy where applicable.
- A landlord can and may take into account any serious disrepair to the property or failures to resolve any breaches of the lease.
- A Landlord is not entitled to consider the loss in value of a freehold title if they have no intention of selling it.
If a landlord delays or refuses to agree to an application for consent to assign or sublet, a tenant may have two options:
- They can make an application to the Court for a declaration that they are entitled to proceed; or
- They could proceed without consent
If the lease on a property states that a tenant needs the consent of the landlord and that they cannot unreasonably withhold consent, a tenant may go ahead and assign or sublet anyway if they believe the landlord has acted unreasonably in refusing consent.
The burden will then be placed upon the landlord to take action against the tenant.
If the tenant misjudges the landlords refusal and continues to proceed without consent they may risk the landlord seeking damages, an injunction or forfeiture of the lease, not to mention a great deal of legal costs against the tenant.
The safer option would be to make an application to the Court for a declaration on the issue. This will place the burden on the tenant to prove that the landlord has been unreasonable or has failed to respond in a reasonable amount of time. If the landlord is in breach of its duties, Court proceedings may include any claims for damages. These damages can be punitive (aimed to punish the landlord rather than compensate the tenant).
Inadvertently Granting Consent
All landlords should take extra care so as to avoid granting consent in correspondence before a licence to assign or sublet has been completed. The landlord should respond quickly, clearly stating that consent will not be given unless and until which time that consent is embodied in an official and completed licence to assign.