Reasonableness – it’s in the decision

A Court of Appeal decision on a landlord’s refusal to consent to an assignment

It is common for leases to require a tenant to obtain landlord’s consent to an assignment, and to provide that the consent cannot to be unreasonably withheld. This unreasonableness condition was recently considered by the Court of Appeal in No. 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250.

In this case, the landlord refused to consent to the assignment of two 999 year leases of flats at No 1 West India Quay in Canary Wharf. In addition to the payment of service charge arrears, the landlord had imposed three conditions on its consent:

  1. an inspection of each flat by a surveyor;
  2. a bank reference for the proposed assignee; and
  3. an undertaking to pay £1,600 plus VAT (being an administration fee of £1,250 plus VAT and a surveyor’s fee of £350 plus VAT).

The tenant refused to agree to these conditions, and the landlord refused to consent to the assignments on the ground that the conditions had not been complied with.

The High Court had previously deemed condition 1 and 2 to be reasonable. However, the requirement to pay the administration fee had been held to be unreasonable. The Court of Appeal did not re-consider the High Court’s assessment of reasonableness, instead it considered whether the landlord acted reasonably in refusing its consent where there were a mixture of both reasonable and unreasonable grounds.

The Court of Appeal held that landlord’s decision to refuse consent was reasonable on the basis that the landlord would still have refused consent on the reasonable grounds even if the unreasonable ground had not been put forward.

The key take away for landlords (as put by Lord Justice Lewison) is whether the decision to refuse consent was reasonable; not whether all the reasons for the decision were reasonable.

This is an important decision for landlords in both a residential and commercial context.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.