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Withholding consent to change of use: Back to basics

Tenancy agreement and keys from home in a real estate agency. Print publication

20/11/2019


What does it mean when a landlord is required to act reasonably in the context of consenting to change of use?  In this article Real Estate specialist Andrew Maclean looks at the key aspects which the courts will consider when considering whether it is reasonable for a landlord to withhold its consent to a change of use, and provides practical guidance for landlords, tenants and agents alike.

Landlord and tenant relationship and nature and location of the land

It will not generally be reasonable for a landlord to withhold consent for any reason which is entirely unconnected with the landlord and tenant relationship and/or with the subject matter of lease.

That does not mean, however, that the landlord is not also allowed to take into account wider factual circumstances.  For example, the nature and location of the land will be relevant and the courts will consider what would be reasonable in respect of the surrounding land. As a general principle, permitted user clauses should not be enforced in any more restrictive manner than is necessary to protect the value of a landlord’s property, including any adjoining or neighbouring premises of the landlord.

Rent and value of property

It is likely that it would be reasonable for a landlord to withhold consent where the change of use is likely to reduce rent attainable on a review or renewal, to reduce future value of the property and/or to deter future tenants.

In International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1] the landlord refused to give its consent to an assignment of the lease on the ground that the proposed use would negatively impact the value of the landlord’s reversionary interest.

The court held that this refusal by the landlord was unreasonable, because by the end of the term of the lease the value of the site as a whole and the letting value of the property would not have reduced and the landlord had no grounds for reasonably apprehending any damage to its interest in the property.

Restrictions on the landlord’s freehold title and breach of covenant

In some cases, there may be a covenant on the landlord’s freehold title which restricts how the land may be used. If so, or if there is any possibility that the proposed use would potentially breach any existing covenant, it is likely to be reasonable for a landlord to refuse consent.

“Consent not to be unreasonably withheld or delayed”

If a permitted use clause contains the wording “not to be unreasonably withheld or delayed”, the landlord cannot refuse the change of use arbitrarily and must provide a timely response.

An unreasonable delay or the imposition of unreasonable conditions would constitute an unreasonable refusal.  Similarly, where a reasonable time has passed since the tenant made the application, providing all information reasonably necessary for the landlord to consider such application, a failure on the part of the landlord to give a decision either way this amounts to an unreasonable withholding of consent.

What is a reasonable time?  That will depend on the facts of any particular case, but it will generally be measured in days or perhaps weeks, rather than months.

Burden of proof

The burden of proving that consent has been unreasonably withheld falls to the tenant, unless the landlord has not given reasons. If the landlord has not given reasons, the landlord must prove it has acted reasonably.

Practical advice

If consent from the landlord is required under the lease, consent in writing should be requested by the tenant in clear and unambiguous terms, so that there is certainty as to when the application was made and what it proposes.  Tenants or their agents should also endeavour to anticipate what information the landlord will require in order to properly consider the application and to provide it upfront, so as to limit the potential for the landlord to delay matters by having to ask for it themselves.

If and when a landlord or agent receives any application for consent, it should proactively obtain all information necessary to enable it to properly consider such request, and it must act quickly so as to avoid the possibility of a claim of unreasonable delay.

When deciding whether or not to grant consent, landlords should remember that reasons for refusing consent cannot be entirely unconnected with the landlord and tenant relationship and the terms of the lease.  Over and above that, landlords can legitimately consider matters such as whether it would it be reasonable to refuse consent on the basis of any wider estate; whether the change of use would affect the reversionary value of the property; and whether it would deter any future tenants.

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[1] [1985] EWCA Civ 3

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