Landlord's Consent To Assignments And Sublettings

LANDLORD'S CONSENT TO ASSIGNMENTS AND SUBLETTINGS

Why does a landlord need to deal promptly with a tenant's application for consent?
Obtaining licences or consents from landlords is a frequent cause of frustration to tenants, and is often one of the points of greatest tension in the landlord/tenant relationship. The decision in Blockbuster Entertainment Ltd v Barnsdale Properties Ltd (2003) should focus landlords' attention on the importance of managing the process of giving consent. In Blockbuster, the landlord's delay in giving consent to a proposed underletting resulted in the loss of the deal and a damages award of £70,000.

Section 1(3) of the Landlord and Tenant Act 1988 makes it clear that where landlord's consent is required for an assignment or underletting, the landlord must give that consent except where it is reasonable to withhold it. Further, that consent must be given within a reasonable time after receipt of the tenant's application. Ominously, Lloyd J concluded in Blockbuster that since there was no good reason for withholding consent, it should have been given within a week after the tenant's request - a far tighter timescale than the 28 days sometimes suggested by inference from Dong Bang Minerva (UK) Limited v Davina [1996] 2 EGLR 31.

If Blockbuster indicates a hardening of judicial attitudes, then landlords must respond by ensuring that the procedures for receiving applications for consent, for considering those applications, and for documenting consent are streamlined and properly communicated to tenants.


Avoiding delays in licence applications
Incomplete applications, or applications sent to the wrong place, frequently cause delays, frustration and lost deals. The initial approach to request consent is often made to the landlord's solicitor - usually by letter but increasingly by fax or email. Those initial letters will generally describe the proposed transaction but are rarely supported by information that is properly required by the landlord and its agents to assess the application. References, accounts and other necessary details then have to be sought.
If the solicitor accepts and acts upon the tenant's letter, it is extremely difficult to argue that the application has not been properly made. Time will therefore have begun to run against the landlord. To meet this point, it is strongly recommended that solicitors should not be authorised to receive or to act upon such letters. Where solicitors are involved, their role is to ensure the proper documentation of consent or to advise whether consent might properly be withheld - not to consider the application or to decide whether or not consent should be given.

How can the consent process be streamlined?
The key is to ensure that the process for making an application is clearly set out and is properly communicated to the tenant. The landlord is entitled to know the details of the transaction and to receive full information regarding the covenant strength of the proposed assignee or subtenant. As part of the management information or regulations given to the tenant when the lease is granted, the landlord should specify the information that will be required before an application is properly made. It will then be possible to show that no application for consent has been made, and so time has not started to run, until those explicit requirements have been met.

The information given to the tenant at the outset should include names and addresses for the landlord or its agent, with a direction that applications will be accepted only if sent to the specified address. It should also provide, preferably in checklist form, the information that will be required.

Documenting consent
Licences to assign or sublet, along with licences to alter or change use, are essential parts of the title and management pack required for any commercial premises. In many circumstances a formal licence will be obtained - for example where the lease is an "old" tenancy where direct covenants are required from the assignee. In others - such as the assignment of a new lease where an authorised guarantee agreement is not required - a simple letter would suffice as the transmission of the benefit and burden of covenants is dealt with by statute.

For further information or advice please contact propertylitigation@charlesrussell.co.uk

These notes represent only an outline summary of relevant principles and detailed advice should always be sought in particular cases.