Consent to assign

Almost all commercial property leases will prohibit tenants from assigning or underletting lease agreements without written consent from their landlord. However landlords should not withhold that consent unreasonably as stated by section 19 of the Landlord and Tenant Act 1927

There are certain rules and time limits regarding applications by tenants requesting consent to assign or sublet and as such, before applying it is best to consult independent legal advice.

Landlords who receive applications for consent must also act quickly and within a reasonable amount of time. We would also recommend that landlords seek independent legal advice so as to avoid any issues. 

For more information on any issues regarding consent to assign or sublet contact the expert solicitors at Stephensons today on 0203 816 9303.

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Duty to give consent 

Landlords are under certain obligations when they receive an application for consent to assign or sublet and due to impositions placed by the Landlord and Tenant Act 1988 they cannot withhold consent unreasonably.

When a landlord receives an application for consent to assign or sublet they must:

  • Provide consent within a reasonable time, except in cases where withholding of consent is reasonable.
  • Whether they give consent or refuse, the landlord must serve the tenant notice of the decision within a reasonable amount of time and specify their conditions as well as any reasons for refusal.
  • Pass on the received application to any relevant third party within a reasonable amount of time. In this case Stephensons would advise tenants to find out if there are any superior landlords, mortgagees or other third parties from whom consent may be required as soon as possible.

Your landlord will need to be able to prove that they have complied with all of these duties.

What is a reasonable amount of time/reasonable period?

Currently, the Court’s stance on what is a “reasonable” amount of time to respond to an application for consent is measured in weeks rather than days. In instances where the case is complicated, these should also be measured in months rather than weeks.

This time period in which a landlord has to respond will not always begin from the date of the tenant’s application for consent. The landlord is, entitled to fully understand the true nature of the transaction and must be provided with a sufficient amount of information to make a decision. Because of this, the “reasonable time period” will not start until the landlord has all the relevant information required.

A landlord must notify the tenant of their decision as soon as possible.

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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.

Solutions

If a landlord delays or refuses to agree to an application for consent to assign or sublet, a tenant may have two options:

  1. They can make an application to the Court for a declaration that they are entitled to proceed; or
  2. 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.

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