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Unreasonably withholding consent to assign a lease

How unreasonable does a landlord have to be?

Leases will usually require a landlord’s consent before a tenant can assign, sublet, or otherwise part with possession of premises. This is understandable as a landlord needs the ability to protect their interest in their premises. In the current market however, a tenant’s need for premises can change quickly and often, particularly in retail units where customer preferences and footfall are vital.

Section 19(1) of the Landlord and Tenant Act 1927 says that for all leases where there is a requirement on a tenant to obtain a landlord’s consent before assigning, underletting or in any way changing possession of all or part of the premises, consent is not to be unreasonably withheld. As a result, a landlord must always act reasonably – although reasonable doesn’t necessarily mean correctly or justifiably – just what a reasonable person would do in those circumstances. The decision must be based on the relationship of the landlord and tenant and a landlord cannot look to better their position by refusing consent.

When can a landlord refuse consent?

It may be reasonable to withhold consent if the assignee does not appear able to make the rental commitments required under the lease. A profit level of ‘three times the annual rent’ is often used as a benchmark to show that a tenant can make the rental payments. That is not a hard and fast rule though and a landlord refusing consent on the basis that a tenant’s profit levels do not meet that criteria will not necessarily be reasonable. It would be reasonable to refuse consent where the proposed assignee would use the premises for a use which would be a breach of the user covenant. Similarly, the landlord can refuse consent if it wants to maintain a good tenant mix, for example in a shopping centre. It is also reasonable for a landlord to refuse to assign a lease to an assignee who would be in direct competition with their business.

However, it is unreasonable for a landlord to refuse consent where they look to obtain a variation to the lease to improve their position as a condition of granting consent or on any grounds which are discriminatory to the proposed assignee or sub-tenant. Also, a landlord cannot reasonably withhold consent to an underletting on the basis that to do so may set a low rent comparable for forthcoming rent reviews.

Less clear cut examples are where a landlord refuses consent to sub-let due to concerns about the long term viability of the sub-tenant. The landlord’s direct covenant with the tenant remains and so the landlord’s ability to collect rent should not be affected. However, it is possible that the market will perceive the sub-letting as a reduction in the value of the property and that could affect the landlord’s reversionary interest. Similarly if the landlord refuses consent to assign or sub-let on the basis of existing breaches of covenant by the tenant, it will depend on the severity of the breaches and the likelihood of the assignee or sub-tenant to remedy them. It would be unreasonable for a landlord to refuse consent to assign on the basis of minor disrepair works, but it may be reasonable to refuse consent to assign where there are substantial dilapidations and the assignee does not appear to have the means to remedy the defects. In cases like this whether or not refusal is unreasonable will depend on all the facts in that particular case.

Timing of applications

The timing of a landlord’s response is also covered by statute. The Landlord and Tenant Act 1988 Section 1(3) states that a landlord owes a duty to a tenant to respond to any application for consent within a reasonable time. What constitutes a reasonable time will depend on each set of circumstances and it would be impossible to set down hard and fast rules. However, case law does give us some indications as to what is and isn’t reasonable. The time period will run from when a landlord receives a complete formal application from the tenant and ends when the landlord’s decision is notified to the tenant. The time period between those two will need to be as short as is sensibly possible It will be weeks and not months, but holiday periods will be taken into account as will the complexities of the deal.

Ultimately it is for the tenant to demonstrate that the landlord is acting unreasonably rather than the landlord to prove its behaviour is reasonable. As such, a tenant making a formal application needs to provide as much information as possible at the time of making the application and provide all relevant details. It will be far easier for a tenant to prove that the landlord is unreasonably withholding consent where the application included complete and comprehensive supporting information, rather than where information has been provided piecemeal and reactively.

Landlords receiving applications need to act promptly as the time limits explained above will apply once the application is made. If you are unsure whether you need to treat the communication from a tenant as a formal application for consent to assign, then ask the question. Correspondence from a tenant saying that you are out of time to withhold consent will put a landlord on the back foot – even if consent would have been granted in any event.

When considering an application to assign, sublet or part with possession, or if you are a landlord you receive one, it is worth taking advice to ensure you are aware of your rights and the likely consequences of consent being refused.

If you require any further information please contact a member of our expert Real Estate Litigation  team.

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Assignment and Consent Standards in Commercial Leases

Mar 6, 2020

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Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. This article presents a brief overview of the assignment provision in commercial leases, both office and retail.

Assignment provisions in commercial leases are heavily negotiated and very important to both landlords and tenants. When a tenant’s interest in a lease is assigned, the tenant is transferring its entire leasehold interest and 100% of the leased premises to a third party for the entire remaining term of the lease. For the tenant, the assignment provision represents a potential exit strategy, dependent of course on the local market, and increased flexibility for future needs. For the landlord, the assignment offers greater security for its revenue stream and hopefully the avoidance of a tenant bankruptcy or default while keeping its building occupied. The tenant’s desire for flexibility and the landlord’s need for control is where the negotiations are focused. This article presents a brief overview of the assignment provision in commercial leases, both office and retail, with particular attention on the laws of Maryland, Virginia and the District of Columbia. The landlord’s standard for providing consent to a request to an assignment will be reviewed, and we will conclude by offering suggested language.

What If The Lease Does Not Contain An Assignment Provision?

The law traditionally favors the free alienation of property. Therefore, under the laws of almost every state, if the lease is silent on whether the landlord’s consent to an assignment is required, then the commercial tenant has the right to assign its interest. This is true in Maryland, Virginia and the District of Columbia. Given this baseline, almost every lease form will have a detailed provision setting forth the assignment process. Note also, however, that in most states it is also enforceable for a commercial lease to have an outright prohibition against assignments. Such a provision would likely be a non-starting deal point for most sophisticated tenants.

What Does Reasonable Mean?

If a lease simply provides that the tenant requires landlord’s consent to an assignment, but does not include the standard for giving or withholding that consent, then in many states the implied standard is that the landlord’s consent may not be unreasonably withheld. Historically this was the minority view, with the historical rule allowing the landlord to withhold consent for any reason. The implied duty of reasonableness is now more the norm as more states adopt this position when presented with the issue. There is express case law establishing this rule in Maryland, and most courts in Virginia and Washington, DC will imply such a covenant of good faith and fair dealing. Most states, though, do allow a landlord the sole right to grant or withhold its consent if the lease clearly expressly provides, and in Maryland the lease must specifically state that the landlord’s consent may be granted or withheld in the sole and absolute subjective discretion of the landlord. Again though, a sophisticated tenant with any leverage should never agree to such a provision.

Most negotiated leases will instead contain a provision requiring that landlord’s consent to an assignment is required, but such consent will not be unreasonably withheld. The tenant will likely also try to include landlord’s obligation to not unreasonably delay or condition its consent. A short clause without further defining what constitutes “reasonableness” generally favors the tenant, and landlords typically prefer including specific standards as to the criteria it can consider when reasonably deciding whether or not to consent to an assignment. Without such specificity, defining “reasonable” is difficult as the landlord and tenant clearly will have differing viewpoints and it may be left as a factual question to be decided in litigation. The typical definition (set forth in the Restatement (Second) of Property) would be that of a reasonably prudent person in the landlord’s position exercising reasonable commercial responsibility.

Absent a detailed provision listing the criteria a landlord can consider when reasonably reviewing a request to assign, a landlord is typically found to be considered reasonable if it considers certain general broad factors. First, the landlord reviews the assignee’s proposed use. In a retail setting, the landlord will be concerned whether the proposed use fits with the existing center and/or violates any existing exclusives or insurance requirements. In an office setting, the landlord might review the expected traffic and wear and tear on the building. Second, the landlord will consider the creditworthiness of the assignee. The landlord (and the assignor) will want to be confident that the assignee is capable of performing tenant’s obligations under the lease and a large creditworthy tenant increases the value of the asset. The assignor might argue that a strict financial test (such as a minimum net worth, for example) is unfair since the assignor is likely not being released upon the assignment and the landlord can still pursue the assignor in the event of a default. Third, the landlord will review the experience and history of the assignor. As mentioned above, landlords instead prefer a detailed list setting forth the many factors that they can include as part of reasonably reviewing a request for a lease assignment.

Without further establishing the criteria, the landlord puts itself at risk of a challenge by the tenant that a denial of a consent is unreasonable.

In defining “reasonable,” courts typically do not allow a landlord to deny or condition consent to an assignment based purely on economic reasons where the landlord results in substantially increasing what it was entitled to under the lease. In Washington, DC, there is well established case law holding that it is unreasonable for a landlord to withhold consent solely to extract an economic concession or improve its economic position. For example, a court would not consider it reasonable for a landlord to condition its consent on the assignee paying a greatly increased rent. Instead, as discussed below, landlords should look to protect their interests in a market of increasing rents by providing for either the sharing of excess rentals or a right to recapture.

What Are Typical Provisions In an Assignment Clause?

As discussed above, tenants generally prefer a short assignment provision simply requiring the landlord to not unreasonably withhold, condition or delay its consent to an assignment. But most leases are drafted by landlords, and over the years the assignment provisions have evolved to contain many typical provisions in addition to further defining “reasonableness,” including the following below.

  • Sharing of Excess Rents. Since many states do not permit a landlord to condition its consent on improving its economic position (e. g. , by increasing the rent), most leases instead contain a provision where the landlord is entitled to all or a portion of the profits. The profits may mean increased rent, or it may even be construed more broadly to consider the value of the location in a sale of the tenant’s business. The landlord’s argument is that it doesn’t want the tenants competing in the real estate market. The tenant should push back here, and certainly try to lower the percentage shared, carve out any consideration received in the sale of tenant’s business, and only share profits after all of the tenant’s reasonable costs incurred in connection with the assignment were first deducted.
  • Corporate Transfers. Since a purchase of the entity constituting tenant is likely not deemed an assignment under the law, most leases make clear that any such corporate sale, including the sale of either a controlling interest in the stock or substantially all of the assets of the tenant, is deemed an assignment for purposes of the lease. The tenant should carve out permitted transfers for typical mergers and acquisitions under certain conditions, and also carve out routine transfers of stock (or other ownership interests) between existing partners or for estate planning purposes. The landlord will likely accept a permitted transfer concept provided they receive adequate notice and the successor entity succeeds to all of the assets of the original tenant with an acceptable net worth.
  • Assignment Review Fee. Most landlords include in their form lease the requirement that the tenant reimburse them for legal and administrative expenses incurred in reviewing the request for consent and preparing the assignment. The tenant clearly wants to keep these fees reasonable and in keeping with the local market.
  • Recapture Rights. Landlords like to include the express right to recapture the premises in the event the tenant comes to it to request a consent for an assignment. A recapture clause allows the landlord to terminate the lease if market rents have increased or if it needs the space for another use. Sophisticated tenants should push back here as much as leverage allows, try to limit the time periods, and if nothing else try for the right to nullify the recapture by rescinding its request for the consent.
  • Tenant’s Remedy. To protect themselves from claims for damages from the tenant if the landlord withholds its consent to a requested assignment, landlords often include a provision where the tenant waives its rights to monetary damages in such a situation and can only seek injunctive relief. The tenant should try to delete this provision, or at least, if leverage permits, provide for the right to seek damages if the landlord is subsequently found to have acted in bad faith.

Assignment provisions are heavily negotiated and both the commercial landlord and tenant need to be advised to the applicable local law and know the market for a comparable transaction. ( Note: The author represents office and retail landlords and tenants throughout Virginia, Maryland and the District of Columbia.) Sample reasonableness provisions for both office and retail uses are copied below for reference.

Retail Lease

Landlord and Tenant agree, by way of example and without limitation, that it shall be reasonable for Landlord to withhold its consent if any of the following situations exist or may exist: (i) In Landlord’s reasonable business judgment, the proposed assignee lacks sufficient business experience to operate a business of the type permitted under this Lease and to a quality required under this Lease; (ii) The present net worth of the proposed assignee is lower than that of Tenant’s as of either the date of the proposed assignment or the date of this Lease; (iii) The proposed assignment would require alterations to the Premises affecting the Building’s systems or structure; (iv) The proposed assignment would require modification to the terms of this Lease, or would breach any covenant of Landlord in any other lease, insurance policy, financing agreement or other agreement relating to the Shopping Center, including, without limitation, covenants respecting radius, location, use and/or exclusivity; (v) The proposed assignment would conflict with the primary use of any existing tenant in the Shopping Center or any recorded instrument to which the Shopping Center is bound; and/or (vi) The proposed assignment or subletting would result in a reduction in the Rent collected by Landlord during any portion of the term of this Lease.

Office Lease

Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply: (i) The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building; (ii) The Transferee intends to use the Premises for purposes which are not permitted under this Lease; (iii) The Transferee is a governmental agency; (iv) The Transfer occurs prior to the first anniversary of the Lease Commencement Date; (v) The Transferee has a net worth of less than $10,000,000.00; (vi) The proposed Transfer would cause a violation or trigger a termination right of another lease for space in the Building; or (vii) Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Building at the time of the request for consent, or (ii) is negotiating with Landlord to lease space in the Building at such time, or (iii) has negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice.

Reprinted with permission from the March edition of the Commercial Leasing Law & Strategy© 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected] .

  • John G. Kelly

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Knowledge Hub for Growth

When is landlord consent being unreasonably withheld and what can you do about it.

Samantha Paxton

As a commercial tenant, you usually need the consent of your landlord if you wish to take certain actions with your lease or property. But what are your options if your landlord is not co-operating?

This article explores the issues with requiring consent in two common situations; making alterations to the property or assigning your lease to another party.

Ultimately, it is down to the facts and circumstances in each case whether consent is required, whether it may be unreasonably withheld and the implications of that. If after reading this article you require further assistance, our friendly team of commercial property solicitors can provide expert legal advice.

What are a tenant’s options if consent is withheld?

Tips for tenants when applying for consent, consent to alterations, when is a landlord’s consent required to make alterations.

Depending on the terms of your lease, you might not be able to carry out any alterations without seeking the written consent of your landlord beforehand. Sometimes landlords allow internal non-structural alterations without needing consent, but this depends on negotiations at the heads of terms stage and the landlord’s requirements for the building. It's important to weigh up the pros and cons

Unless it is clear from the lease that the landlord's consent must be given in a formal licence (and there has been no variation or waiver of this), a landlord may be held to have given consent in correspondence either from itself or from its agents.

Are there implied obligations on the landlord not to unreasonably withhold consent?

If consent is needed, you’ll want your landlord to deal with your request promptly to tie in with your business plans. A delay in giving consent could significantly disadvantage a tenant. 

There is no time limit for the landlord to give its consent, so you would hope to have express wording in the lease that consent must not be unreasonably withheld or delayed.

For general alterations there is no implied obligation on the landlord not to unreasonably withhold consent, so if there no express wording to that effect in the lease, they can refuse without having to give any reasons.

If consent is not to be unreasonably withheld, it is a question of fact depending on all the circumstances whether the landlord, having regard to the actual reasons for refusing consent, acted unreasonably.

What rights does a tenant have to undertake “improvements”?

In certain circumstances, the tenant can carry out improvements even the lease prohibits alterations. Under section 3 of the Landlord and Tenant Act 1927, a commercial tenant can serve a notice on the landlord of its intention to carry out certain improvements. The landlord can object within three months and if it does then the tenant has the right to apply to the Court for authorisation. If the landlord does not object in the required timeframe, the tenant may lawfully carry out the improvements.

If the lease allows alterations with the consent of the landlord, it is implied that for improvements, such consent cannot be unreasonably withheld.

Depending on the facts and if relevant notices are served, the tenant may be able to obtain compensation at the end of the term for such improvements.

There is not much case law on what is a reasonable withholding of consent for alterations, compared with decisions relating to consents to assign the lease (see below).

Generally, a tenant would have to show a Court that consent has been unreasonably withheld. If the landlord has not given its reasons, then the landlord must prove that it acted reasonably.

A tenant can apply to the Court for a declaration that consent is being unreasonably withheld, or it can risk carrying out the works without the consent. It cannot obtain damages. A tenant carrying out works without consent risks being forced to remove its alterations, which is often a requirement at the end of the lease even where consent has been given.

Disposing or assigning a lease

When is a landlord’s consent required to assign a lease (for tenants who want to leave and transfer the lease to new tenant).

If the lease does not restrict the tenant’s ability to assign, a lease may be transferred to another party at any time. Most commercial leases contain restrictions which enable the landlord to keep control over the tenant’s identity and to check that it is likely to be able to meet its lease obligations. For more detailed information on the process of transferring a lease to another business, see our guide: Assigning a commercial lease .

Are there implied obligations on landlord not to unreasonably withhold consent?

A lease will usually allow assignment with the landlord’s consent and will expressly state the landlord’s consent is not to be unreasonably withheld.

If the lease permits the tenant to assign with the landlord's consent, it is also implied that the landlord's consent cannot be unreasonably withheld.

Where consent to assign is not to be unreasonably withheld, the following statutory duties are imposed on your landlord:

  • To give consent, except where it is reasonable not to do so
  • To give consent within a reasonable time
  • To give the tenant written notice of the decision, which includes confirmation of any conditions or the reasons for refusal
  • To pass on the application to anyone else whose consent is needed under the lease, such as the superior landlord or mortgage lender.

What conditions on assignment can the landlord impose?

Typical conditions a landlord may expect if they grant consent to assign a lease include:

  • Authorised guarantee agreement – where you would guarantee the performance of the lease obligations by the new tenant
  • A separate guarantor of the new tenant – if for example their financial standing is a concern to the landlord

The landlord may refuse consent if:

  • monies are owed
  • there has been a material breach by the tenant that has not been remedied
  • if in the landlord's reasonable opinion, the assignee is not of sufficient financial standing to enable it to comply with the tenant's obligations, or
  • any other reasonable circumstance

A tenant could negotiate with the landlord to explore what changes they could make to their request for it to be considered acceptable to the landlord.

If the tenant believes the landlord has unreasonably withheld consent, they could apply to the Court for a declaration that they are entitled to proceed.

If the tenant continues to assign a lease in the absence of the landlord’s consent, this would be a breach of the lease and they could be sued for damages or risk the lease being forfeited. To find out more about the process by which a landlord exercises a right to terminate a lease, read our article on Forfeiting a commercial lease .

When you apply for landlord’s consent, you should ensure you:

  • review the terms of your lease before embarking on any changes to check whether your landlord’s consent is required and whether any charge can be made by the landlord for dealing with your request
  • make your request in a timely manner to avoid unnecessary delays seeking your landlord’s consent
  • serve any consent to assign application, correctly, in accordance with the terms of the lease or relevant legislation
  • provide any supporting information that is required by the terms of the lease when requesting consent

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Home » Expertise » Real estate » Property entrepreneurs » FAQs for property entrepreneurs » Dealing with tenant requests for alterations and assignment

Property Entrepreneurs

FAQs - Dealing with tenant requests for alterations and assignment

Alterations, when is a landlord’s consent required to make alterations.

If the lease contains no restrictions, the tenant has absolute freedom.  If the lease contains an absolute prohibition then the landlord can refuse or impose unreasonable conditions.  If the lease contains a qualified condition then the landlord’s consent is deemed not to be unreasonably withheld where work is “improvement” (s.19 (2) LTA 1927).  If the lease contains a fully qualified covenant, the landlord’s consent is not to be unreasonably withheld.

What are the statutory duties/restrictions?

Under s.19 (2) LTA 1927 (only where qualified or fully qualified covenant), the landlord can require the tenant to:

  • pay its costs
  • reinstate; and/or
  • pay compensation for the diminution in the value of reversion.

What is the burden of proof if the landlord fails to comply with his/her duties?

The burden of proof is on the tenant to show that the landlord is unreasonably withholding consent and to establish losses.

What remedies does the tenant have?

Although damages are not available, the tenant has two remedies:

  • Self-help: This is where the tenant carries out the improvements.  Firstly, the tenant should send a letter before action to get the landlord’s consent as this avoids problems later.  The tenant should also ask the landlord to confirm that he/she will not peaceably re-enter.  Although this is less risky than on alienation, the tenant may be required to reinstate.
  • Court proceedings: This is for a declaration that the landlord has unreasonably withheld consent and/or no further act of consent is required from the landlord.

What remedies does the landlord have if the tenant uses the self-help remedy?

The landlord has three remedies:

  • Forfeit lease: by peaceable re-entry or court proceedings.  If the landlord has complied with his/her duties, the tenant will have to remedy the breach to get relief from forfeiture and pay the landlord’s costs and compensation.  Note that a rent stop should be put on the account and the lease should not be treated as continuing.
  • Damages against the tenant: firstly, the landlord can claim for compensatory damages to reflect the sum the landlord might have demanded to relax the covenant against the tenant ( Crestfort v Tesco ) at the date of the contract/tort of interference with the contract with the tenant by the sub-tenant. Secondly, it is possible to recover damages from both the tenant under the lease and the sub-tenant under tort of interference with the contract if the sub-tenant had intended to procure that breach ( Crestfort v Tesco ).
  • Injunction: The landlord can apply for an injunction against the tenant such as ordering a surrender of unlawful sub-lease ( Crestfort v Tesco ). This action would be  particularly appropriate if the landlord does not want to forfeit in a falling market.

When is a landlord’s consent required to assign a lease?

If the lease contains no restrictions then the tenant has absolute freedom.  If the lease contains an absolute prohibition then the landlord can refuse or impose unreasonable conditions.  If the lease contains a qualified condition, then the landlord’s consent is deemed not to be unreasonably withheld (s.19 (1) LTA 1927).  If the lease contains a fully qualified covenant, then the landlord’s consent is not to be unreasonably withheld.

Under s.1 LTA 1988 (only where qualified or fully qualified covenant) on written application by the tenant for consent, the landlord must within a reasonable time:

  • give consent (unless reasonable not to); and
  • give the tenant a written notice of the landlord’s decision stating, where consent is given, any reasons which the landlord imposes or, where consent is refused, the reasons for refusal.

Under s.2 LTA 1988, the landlord must pass on any written application to the superior landlord within a reasonable time.

What is the burden of proof if the landlord fails to comply?

The burden of proof is on the landlord to show that they complied with statutory duties and on the tenant to establish losses.

The tenant has thee remedies:

  • Self-help: where the tenant assigns anyway.  Firstly, the tenant should send a letter before action to get the landlord’s consent as this avoids problems later.  The tenant should also ask the landlord to confirm that he/she will not peaceably re-enter.  If the landlord does not confirm, the tenant should consider seeking an injunction restraining the landlord from re-entering until the question of whether there is a breach is resolved by agreement or the courts.
  • Tenant issues court proceedings: for a declaration that the landlord has unreasonably withheld consent and/or no further act of consent is required from the landlord.
  • Tenant issues a damages claim: for breach of a statutory duty under LTA 1988:
  • Consider causation eg would the proposed assignment abort anyway?  If so, there is no loss.
  • Consider the foreseeability of losses.
  • The tenant must mitigate its loss and must try and remarket the premises in the best terms available in the open market as soon as possible.
  • Consider measures of damages: Firstly, compensatory damages such as rent and the liabilities the sub-tenant would have to pay. For example, in Blockbuster v Barnsdale , the tenant recovered £70,000 where the proposed sub-rent was £56,000 because of insurance and rates recovery in addition to  loss of premium, abortive costs, loss of opportunity (if the tenant is able to transfer dilapidations liability). Secondly, exemplary damages if the landlord acted obstructively or to gain an advantage from refusal of consent. For example, there were exemplary damages of £25,000 in Design v Thurloe where the landlord wanted the assignment to fail to get surrender and to then re-let on better terms.

What remedies does the landlord have if the tenant uses self-help remedies?

  • Forfeit lease: by peaceable re-entry or court proceedings.  If the landlord has complied with duties, the tenant will have to remedy the breach to get relief from forfeiture and pay the landlord’s costs and compensations. Note that a rent stop should be put on the account and the lease should not be treated as continuing.
  • Damages against the tenant: firstly, compensatory damages to reflect the sum the landlord might have demanded to relax the covenant against the tenant ( Crestfort v Tesco ) at the date of the contract/tort of interference with the contract with the tenant by the sub-tenant.  It is also possible to recover the damages from both the tenant under the lease and the sub-tenant under the tort of interference with the contract, if the sub-tenant had intended to procure that breach – see Crestfort v Tesco .
  • Injunction against the tenant: for example, ordering a surrender of an unlawful sub-lease ( Crestfort v Tesco ), particularly if the landlord does not want to forfeit in a falling market.

How may a landlord refuse consent?

The landlord must give reasons for any refusal of consent.  The landlord is confined to the reasons given in his written statement so he cannot add other reasons or later justify refusal on other grounds.  The landlord and tenant may agree (either in the lease or before the application for the licence) any circumstances or conditions subject to which the licence may be granted which are not then subject to a test as to what is reasonable.

What is reasonable?

What is reasonable is a question of fact ( Bickel v Duke of Westminster [1977] QB 517).  The landlord need not show that his objections are objectively justifiable, only that reasonable landlords acting prudently and competently would also rely on them ( Pimms Ltd v Tallow Chambers Co [1964] 2 QB 547 at 564).

Generally, a landlord need only consider its own interests but, if there is such a disproportion between the benefit to the landlord and the detriment to the tenant in refusing consent, then it may be unreasonable to withhold consent (International Drilling Fluids).  The landlord is entitled to be told the true nature of the proposed transaction and so will not unreasonably withhold consent if this has not happened.  The landlord is fully entitled to look critically at any matter relating to the proposed assignee that would reduce the value of his interest, especially if he intends to sell it.

The purpose of the covenant against assigning without the landlord’s consent is to protect the landlord from having its premises used or occupied in an undesirable way or by an undesirable tenant or assignee (International Drilling Fluids).  A refusal must relate to the landlord and tenant relationship in regard to the subject matter of the lease, so:

  • it will normally be reasonable to refuse consent or impose a condition if such refusal or condition is necessary to prevent the tenant from acting to the prejudice of the landlord’s existing rights; and
  • it will normally be unreasonable to impose a condition which would increase or enhance the control which the landlord was entitled to exercise under the terms of the lease and the general law (a ‘collateral advantage’).

What are the grounds for refusing alterations (fully qualified covenant)?

If the alterations reduced the value of the reversion, then the landlord should ask the tenant for compensation on that basis.  Reasonable refusal will usually have to be based on:

  • evidence of long term structural instability ( Igbal v Thakar [2004]); and/or
  • the commercial impact on the landlord’s business that cannot easily be qualified ( Sargeant v Macepath (Whittlebury) [2004]).

What are the grounds for refusing assignment (qualified/fully qualified covenant)?

There are several ground for refusal including:

  • The financial strength of the assignee
  • Any breach of covenant by the tenant
  • The superior landlord’s consent; and/or
  • Any change of use/alterations.

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Consent not to be unreasonably withheld or delayed…

In the context of a lease assignment the High Court recently considered whether a landlord’s consent had been unreasonably delayed and whether the conditions imposed were reasonable.

Please note this decision was overturned on appeal - a summary of the Court of Appeal judgment can be found here .

The duties imposed on a landlord when considering an application for consent to assign are found in the Landlord and Tenant Act 1988. It applies in any case where a tenancy includes a covenant on the part of the tenant not to assign, underlet, charge, or part with the possession of the premises or any part of the premises without the consent of the landlord or some other person and the consent is not to be unreasonably withheld. In short:

  • the landlord is under a duty to consent to the application unless it is reasonable for them not to do so
  • a landlord must give written notice of his decision to the tenant and the notice must specify any conditions attached to the consent or if consent is refused the notice must specify why
  • the landlord’s time for considering the application will not start running until a written application has been served on the landlord - it is then under a duty to respond with a "reasonable" period
  • what constitutes a reasonable period will depend on the circumstances of the application but generally speaking it should be days or weeks rather than months
  • if the landlord refuses consent, the onus is on the landlord to show the refusal is reasonable, and
  • various remedies are available to the tenant if consent is found to have been unreasonably withheld, including a damages claim against the landlord (and as it will be a breach of statutory duty exemplary damages may be available).

In No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd ([2016] EWHC 2438 Ch), East Tower Apartments Limited (ETAL) owned some 42 apartments in a residential block where West India Quay (Residential) Limited (West India Quay) was the landlord. Following a long running dispute over the service charge for the block and an uneasy relations between the parties ETAL had decided to sell its apartments. The case focuses on ETALs application for consent to assign in relation to three of its apartments. While each case is fact specific the judgment serves as a useful reminder of some of the issues in play.

ETAL had already assigned eight of its apartments by the time the applications for the three flats in question were made. While on the eight previous applications ETAL was unhappy with the level of administration fees charged by West India Quay for considering these applications, it had nevertheless provided the undertakings requested in order to progress matters. However, a further increase in the fees requested and additional conditions attached to the consent caused ETAL to seek a declaration that West India Quay had either unreasonably withheld or delayed its consent in relation to three of its apartments.

Apartment 28.08 - Was consent unreasonably delayed?

Issue: In July 2014 West India Quay had provided a "sales pack" to ETAL specifying an address to which applications for written consent should be made. On 27 March 2015 ETAL made a written request for consent to the assignment of apartment 28.08 to this address, rather that West India Quay’s registered office which was required pursuant to the lease. Receipt of this request was acknowledged by West India Quay on 30 March 2015. A completion date was set for 17 April 2015 and ETAL chased for the licence. There was correspondence between the parties as to the conditions to be attached to the licence. On 29 April 2015, ETAL served a further request for consent at the landlord’s registered office, which was granted on 13 May 2015, 47 days after the request of 27 March 2015, 14 days after the request of 29 April 2015.

Outcome: The High Court upheld a previous County Court decision that the landlord had granted consent within a reasonable time as service of a formal valid request pursuant to the lease had not been made until 29 April 2015 and consent was granted 14 days later, which was held to be reasonable.

The court found that the alternative address provided by West India Quay did not waive the formal requirement for service specified in the underlease. It was held that this alternative address may be viewed as a way of opening correspondence in the first instance with a view that the application may be resolved by agreement and/or discussed informally. Formal notice then triggered the process under which the landlord was under a statutory duty to respond in a reasonable period.

Apartments 27.02 and 27.09 - Were the conditions reasonable?

Issue: Requests for consent to assign were then made in relation to two further underleases (apartments 27.02 and 27.09). The landlord sought to impose the following conditions in relation to each consent:

  • a bank reference for the assignee to allow the landlord to assess the prospective assignee's covenant strength.
  • a condition requiring inspection of the apartments to see if there had been any breach of the underleases plus payment of the surveyors fees for this in the sum of £350 plus VAT.
  • an undertaking for West India Quay’s administration fees of £1,250 plus VAT.

The landlord refused consent as the tenant resisted payment of the fees and provision of the reference.

Outcome: The High Court held that it was reasonable for the landlord to require a bank reference so that it could be satisfied that the assignee would be able to meet the underlease covenants which included financial expenditure, and this was a simple and inexpensive means of doing so. The court reasoned that paying a substantial premium did not demonstrate financial substance as the money could have been gifted or borrowed and it was not relevant that this condition was not required in the underlease alienation provisions. The fact the landlord had various options available to in in the event of default was also not relevant.

The High Court also held that the requirement for a surveyor to inspect at a charge of £350 plus VAT was reasonable as this would allow the landlord to ascertain whether there were any breaches of the lease which was part of a reasonable information gathering exercise informing its decision as to whether to consent (eg the incoming tenant may not have the same covenant strength as the assignor when it came to making good any breaches/there may have been a once and for all breach in relation to alterations).

However, the High Court held that the administration charge of £1,250 plus VAT was unreasonable and should be assessed by reference to what would need to be done and should not be used as a source of profit. In this case the High Court agreed that a reasonable charge was £350 plus VAT (and the landlord was allowed to retain this) but noted each case will be fact specific

The court held that the landlord’s unreasonable condition in relation to the fees vitiated the two reasonable conditions for a bank reference and inspection as the correspondence between the parties suggested that even if ETAL had agreed to the bank reference and inspection fees consent would still have been refused because of the refusal to pay the administration charge. Consent had therefore been unreasonably withheld. However, it will depend on the facts of the matter and it may well be the case that the good reasons for refusing consent outweigh a bad reason.

The case is a useful reminder of some of the issues in play when a request for consent to dealing under a lease is received. Both landlords and tenants need to ensure that the formalities of the statutory regime are closely observed and of the need to ensure matters are dealt with promptly and reasonably. The commentary in relation to the provision of bank references and inspection of the property prior to assignment offers some useful guidance for those landlords looking to include similar provisions as a condition of consent.

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This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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When can I claim that my Landlord is unreasonably withholding consent?

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Almost all commercial tenants covenant within a lease not to, for example, assign, sublet, make alterations or change the permitted use of a premise unless they have obtained the consent of their landlord. This enables landlords to keep control of occupation and the physical state of theirpremises. However, by way protection of the tenant’s position, the relevant provisions usually expressly state that the consent of the landlord is “not to be unreasonably withheld or delayed”.  This provides tenants with the ability to challenge any unreasonable decision of a landlord should it become necessary.  

Whilst express wording in the lease is preferable, and from the point of view of a tenant should be insisted upon when negotiating lease terms, their absence does not mean a tenant is unprotected. Depending on the circumstance requiring consent, there are various statutory provisions which prevent a landlord from acting unreasonably. These include provisions such as section 19(1) of the Landlord and Tenant Act 1927 which states that where consent to dealing with the lease is required (for example if a lease is to be assigned), consent should not be unreasonably withheld.  Similarly, with regard to alterations, if there is a complete prohibition relating to carrying out works, a tenant may be able to carry out improvements to a premises upon service notice on the landlord and, if necessary, obtaining a Court order if the landlord objects.  Equally, if the lease permits works with consent, a landlord may not unreasonably withhold consent if the works can be seen as improvements works.

Is there an accepted definition of ‘unreasonably withholding consent’?

No. Case law has shown that the definition of ‘unreasonable’ is fact specific to and varies from lease to lease. The length of time a landlord may have to consider an application, the level of costs it may seek to require, the requirements it may have that go beyond the prescribed requirements set out in the lease will very much depend on the circumstances. For example, the withholding of consent and the time required to consider an application to an assignment of a lease to a tenant with poor financial credentials from a very prosperous one may take longer to evaluate and subsequently be reasonable to withhold than an application to one that is financially sound, with potentially better covenant strength than the current tenant.

What can I do if I believe consent is being unreasonably withheld?

Before you do anything, make sure you consider your application and check that you are complying with the obligations under the lease.  If in doubt, take legal advice.  Whilst frustrating, circumstances may dictate that it would be wiser to accept the landlord’s decision and refrain from taking any action or otherwise revise and re-submit the proposals to avoid any further costs.

If you are convinced consent is being unreasonably withheld you could consider:

  • Challenging the landlord’s behaviour which could ultimately lead to Court proceedings; or
  • Proceeding with the alterations/additions/assignment regardless of the lack of consent and with the risk that you may be required to reinstate the position in the event the landlord is held to not be unreasonably withholding consent.

How can I minimise this issue?

If you are taking a new lease, negotiate with your landlord and define within your lease when it will be both reasonable and unreasonable for the landlord to withhold consent.  However, how the process will work in practice is, of course, not only down to the decisions and behaviour of the landlord and its advisors on a case by case basis but also to you, as tenant, when making your application.

landlord unreasonably withholding consent to assignment

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Court of Appeal Rules on “Unreasonably Withholding” Consent for the Assignment of a Lease

In the intricate world of commercial tenancies , landlord and tenant relationships can often be fraught with back-and-forth negotiations. One such scenario recently came to light before the Court of Appeal for Ontario when a dentist, seeking to assign his lease to two other dentists who were set to purchase his practice, found himself entangled in a complex battle for consent. What followed was a series of events that underscored the importance of understanding lease agreements and the boundaries of consent in the context of lease assignments.

What is an Assignment of a Lease?

A lease assignment refers to the transfer of a lease agreement from one tenant to another. When a tenant wishes to assign their lease, they essentially transfer their rights and obligations under the lease to a new individual or entity, known as the assignee.

In Ontario, the Commercial Tenancies Act imposes some restrictions on tenants and landlords when assigning a commercial lease. Specifically, section 23 states that the landlord is subject to the obligation that any license of consent to an assignment is not to be “unreasonably withheld.” Section 23(2) allows a tenant to apply to the Superior Court of Justice where such licence or consent has been unreasonably withheld.

What is the Doctrine of Waiver?

The doctrine of waiver is a legal principle whereby an individual intentionally relinquishes or abandons their right, claim, or privilege afforded in a contract. Under this doctrine, if a party fails to enforce or assert a right or benefit they are entitled to under the contract terms, they may be deemed to have waived that right. In other words, by knowingly and voluntarily choosing not to exercise a certain right, the party loses the ability to claim that right later.

The elements of the doctrine were best described in Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. as “full knowledge of the deficiency which might be relied upon and the unequivocal intention to relinquish the right to rely on it.” Since then, case law in Ontario has developed to clarify the situations in which the doctrine can be applied.

Retiring Dentist Sells Practice

The scope of unreasonable withholding and the applicability of the waiver doctrine were recently considered by the Court of Appeal in Rabin v. 2490918 Ontario Inc . At the time of the dispute, the appellant was a retiring dentist who had practiced for several decades. His practice was a tenant of a building that the respondent acquired to demolish and redevelop in the future. Through the purchase, the respondent became the landlord at the property.

The appellant had agreed to sell his practice to two younger dentists and sought the landlord’s consent to assign the lease as part of the business sale . The provision addressing lease assignments in the commercial lease required the appellant to give “prior written notice” to the landlord of his intent to transfer, and within 15 days of such notice, the landlord would notify of its consent or lack thereof.

Dentist Attempts to Assign Lease

The appellant sent the requisite notice to the landlord, but the respondent did not reply within the 15-day specified timeframe. It was not until 22 days after the notice was delivered that the landlord consented, subject to the addition of a demolition clause. The appellant refused, and the respondent withheld its consent. The parties continued their correspondence with several more requests for the landlord’s consent in the negotiations.

The application judge found that the appellant had waived the requirement under the lease for the respondent to provide consent within 15 days. In arriving at this decision, the judge was swayed by numerous emails sent by the appellant’s counsel renewing the request for consent. The judge dismissed the application.

Court of Appeal Overturns Ruling Based on Legal Errors

On appeal, the Court of Appeal found that the application judge had applied the doctrine of waiver where neither party had raised it as an issue, and the judge had erred in its application.

First, the Court noted that it is well established as a matter of natural justice that “it is not open to a judge to dispose of a material issue in a proceeding on the basis that has not been raised or argued by the parties.” The application judge had applied the doctrine of waiver on his initiative, preventing the parties from making submissions on this point.

Second, the application judge did not reference the test as set out above. He made no determination on whether the appellant had the “unequivocal and conscious intention” to waive his rights in any of the correspondence. In fact, the appellant had continuously insisted on compliance with the lease. The evidence pointed to the stringent test not being met, and thus, applying the waiver doctrine was a legal error.

Lease Assignment Ordered to Proceed

The Court went on to note that the application judge’s analysis should have focused on whether the consent by the landlord was “unreasonably withheld.” In doing so, the Court stated that it would look at “the information available to, and the reasons given by, the landlord at the time the landlord neglected or refused consent.” In light of the facts of the case, this burden was met. The landlord failed to respond within the necessary timeframe, no reasonable excuse was provided for its failure to respond, and attempted to trade consent for a clause for its benefit.

The Court allowed the appeal, set aside the application judge’s order, and granted the appellant’s application. The Court found that the landlord unreasonably withheld its consent to the lease assignment and ordered that the assignment be made.

Contact the Toronto Property Lawyers at Baker & Company for Effective Commercial Real Estate Advice

There are several standard terms within a commercial lease, which often includes provisions pertaining to a lease assignment . However, if a party to the lease does not uphold their obligations to the other party, disputes can quickly arise. The trusted real estate lawyers at Baker & Company have extensive experience drafting, reviewing and negotiating commercial leases. Our lawyers will help you review documentation and ensure that you understand your legal obligations before you sign any contract. Contact us online or by phone at 416-777-0100 to schedule a consultation with a member of our property law team and learn how we can help you.

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Damages for landlord’s unreasonable withholding of consent to assignment.

landlord unreasonably withholding consent to assignment

The recent High Court judgment  Reid v Estreich [2022] NZHC 1433 is an interesting case in that it analyses the damages that may be claimed as a consequence of a landlord’s unreasonable withholding of consent to assignment of lease.

Reid v Estreich involved a leasehold interest of rural land, pursuant to a 999-year lease with a nominal rental, which was owned by a Geraldine and Brandon Reid (tenants). Given the tenure of the lease, the interest was ‘all but equivalent to a fee simple interest.’ The freehold was owned by a Mr Estreich (landlord).

In 2021, the tenants decided to sell their leasehold interest to their son and daughter-in-law (assignees). It appears there was a preliminary exchange between the tenants and landlord in which the landlord offered to sell the fee simple to the tenants. However, the tenants told the landlord they were not interested in buying, the freehold and entered into an agreement for sale and purchase of the leasehold, with the assignees as purchasers, on 8 September 2021. The purchase price was NZ$400,000.

Two weeks later, on 22 September 2021, the tenants gave the landlord formal notice of their wish to assign the lease. This was accompanied by consent documents.

There was no immediate response from the landlord. Then, on 1 October 2021, the landlord sent the tenants’ solicitor an email saying “I appreciate you getting in touch in regard to the lease, transfer at 6224 State Highway 1 but at this stage it is, no benefit for myself to transfer the lease over to Mr, & Mrs Reid’s children. I have intentions of retiring and building a small, two-bedroom unit on my land in the near future if, this cannot be resolved. Would you like to refer to my email on the 12th, August 2021 that I will relinquish the freehold title to, Mr and Mrs Reid’s family for the sum of NZ$100,000. The, other option would be for Mr and Mr’s [sic] Reid to let, them purchase their dwelling for a reasonable offer. Please can you inform Mr & Mrs Reid I will not be, signing the attached document, I am open to further, discussion once you have spoken to your clients. [sic]”

On 18 October 2021, the assignees received a bank loan offer of NZ$400,000 at an interest rate of 3.45% per annum. The offer fixed the rate for 60 days on the basis that the interest rate would change if the loan was not drawn down by 17 December 2021. The assignees accepted the offer on 1 November 2021.

The next day, the tenant’s solicitor sent another consent form to the landlord and told him that settlement was scheduled for 5 November 2021. The solicitor also pointed out to the landlord that there would be costs associated with the delay and that the plaintiffs would seek to recover these from him should his consent not be given in time for settlement. The consent form was re-supplied to him by email the following day with the same warning. On 4 November 2021, the landlord replied saying that he would not unreasonably or arbitrarily withhold his approval of the transfer of the lease but he wanted to take appropriate legal advice.

On 15 November 2021, the tenants’ solicitor notified the landlord that an application would be made to the High Court for a declaration that his failure to grant consent was unreasonable.

On 22 November 2021, the landlord sent a text to the tenants’ lawyer saying ‘… I am not happy with the way to properties kept [sic] so you will hear from my lawyers shortly’. As there had been no further communication from or on behalf of the landlord, the assignees did not draw down the bank loan and the loan offer expired on 17 December 2021.

The proceeding

The tenants and assignees (plaintiffs) filed a claim in the court on 12 January 2022 for an urgent determination as to whether the landlord had unreasonably withheld consent. The reason for the urgency was that the assignees wanted to take advantage of a new loan offer before it expired.

The plaintiffs’ solicitor appeared before the Judge on 17 January 2022 at which time, the landlord had not given any reason for withholding consent except the suggestion that the property had not been kept in good repair. Later that day the landlord participated in a judicial telephone conference and confirmed he would send a text or email to the tenants that afternoon providing consent. Despite this undertaking, no such written consent was provided by the landlord.

The next day, however, on the basis of what was regarded as the landlord’s oral consent to the assignment, the assignee accepted a new finance offer (at an interest rate of 4.19% per annum) and the assignment of the lease was settled on 21 January 2022.

The plaintiffs jointly sought from the High Court a declaration and damages by default on formal proof. The High Court, adopted the applicable legal principles that were summarised by the High Court in Louis Vuitton NZ Ltd v Prince’s Wharf Property , Fund Limited HC Auckland CIV-2004-404-3401, 17 September 2004. It is unreasonable, for a lessor to refuse consent if the grounds do not reasonably relate to the covenant. The landlord said he was unhappy about the state in which the property was kept but he did not provide any evidence of that. The Court also observed that nothing in the assignment would change the landlord’s enjoyment of the freehold interest.

Although the Judge quickly came to the, conclusion that the landlord was in default, for failing to provide its consent, he was, ‘less sure about the claim for damages.’

Section 228 of the Property Law Act 2007 (Act) provides that damages may be recovered from a lessor if consent is unreasonably withheld. The assignees say that because of the delay, the mortgage rate they were required to pay to the Bank on the loan of NZ$400,000 to fund the purchase increased from 3.45% per annum to 4.19% per annum for the first two years of the mortgage. They accordingly sought a total award of NZ$5,920 plus interest.

Section 228(2)(b) of the Act extends the right to damages to parties having no contractual relationship with the lessor as they extend to ‘any assignee, sub-lessee, mortgagee, or person in possession of the leased premises. Because of this, the plaintiffs submitted that an assessment of damages should be based on the principles of remoteness applying in tort. The Judge contemplated whether Parliament intended a legislative intention to invoke considerations of tortious principles of remoteness into the causative element of the remedy. But concluded that to treat the enquiry into damages as one resting on principles of law that do not squarely fit into the legislative context is not justified.

However, the Judge noted that the damages available under s 228 of the Act are available to compensate the claimant “for any loss suffered because of [the] failure by the lessor to comply” with its obligation to not unreasonably withhold consent. He considered that, bearing in mind the simplicity of the statutory language and in the absence of any legislative guidance, the assessment of damages should be addressed as a relatively straightforward exercise of determining causation on the evidence available to the Court. In other words, the question is whether the claimant has proved on the balance of probabilities that they would not have suffered the losses if it was not for the lessor’s unreasonable failure or delay in providing consent.

The Judge opined that the solicitor’s email to the landlord of 2 November 2021, which mentioned ‘costs associated with the delay’, might fall short of putting the landlord on notice that he would be held liable to the assignees for increased borrowing costs. However, he held that the foreseeability of such losses ‘is not a relevant consideration’, and was satisfied, on the balance of probabilities, that the additional interest costs payable by the assignees would not have been suffered had the landlord consented to the assignment within a reasonable timeframe. He accordingly awarded the assignees damages in the sum of NZ$5,920 as claimed.

It appears that the landlord’s motivation for his actions was to try and achieve his preference that the tenants buy out his freehold interest. He had no material grounds for withholding consent. In a case such as this, where there is no merit in the landlord’s position, a pragmatic approach may have been for the tenant and assignee to complete their settlement with or without the landlord’s consent given that such transaction would have, been effective. Taking the matter to the High Court certainly seemed excessive for the small quantum of damages claimed.

Originally published in Volume 23, issue 2 of the Property Lawyer Magazine. Republished with permission.

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Is my landlord unreasonably withholding consent?

by Levi Solicitors | Oct 9, 2017 | Blog Posts

landlord unreasonably withholding consent to assignment

It is common for leases to contain a provision to prevent the tenant from assigning or underletting the lease to another party without the landlord’s consent. This allows the landlord to maintain control over who the tenant will be throughout the term of the lease. To give the tenant some means of protection, this provision is often subject to a qualification that the landlord shall not unreasonably withhold consent. So what does this mean?

What is unreasonable?

Where the lease requires the landlord’s consent to assign or underlet, the landlord should give consent to an assignment or underletting of lease except where it is unreasonable to do so . The landlord should give this consent within a reasonable amount of time .  By unreasonably withholding consent, the landlord would be in breach of covenant under the lease. However, the test is subjective and whether a landlord is being reasonable will depend on the facts of the case. There have been a number of cases over the years looking at the types of acts which would constitute the landlord unreasonably withholding consent to an assignment of lease.

The court will decide each case on the facts. Therefore what is unreasonable in one case may not be in another. Examples include:

  • A landlord with no intention to sell his freehold interest, is not entitled to withhold consent on the basis that there would be a decrease in the value of its interest ( FW Woolworth v Charlwood Alliance Properties [1987] 1 EGLR 53 ).
  • If the assignee does not show financial stability, the landlord is entitled to withhold consent ( British Bakeries (Midlands) v Michael Testler & Co [1986] 1 EGLR 64 )
  • If the tenant has breached a covenant under the lease, this is not automatic grounds for refusing consent. The nature of the breach and the effect on the landlord must be considered in assessing whether it is reasonable to withhold consent ( Singh v Dhanji & Anor [2014] EWCA Civ 414 ).
  • Consent may be withheld if the landlord has reason to believe that the assignee will commit substantial breaches of covenant ( Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59 ). This might include an intention to use the property for purposes other than is allowed under the lease.

Considerations for tenants

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Landlord’s Consent Unveiled: Exciting Lessons and Court Guidance on Commercial Lease Assignments! 

By Kirk Cherry and Julia Conlon

One court case stands out in commercial leasing as guidance for landlords navigating the complexities of consenting to lease assignments. Enter Rabin v 2490918 Ontario Inc. 2023 ONCA 49, a decision that highlights essential considerations for landlords in handling assignment requests. Here are the key takeaways for leasing professionals:

Timeliness and Reasonableness: The Cornerstones of Consent

In the fast-paced world of commercial leasing, time is of the essence. The Rabin case emphasizes the significance of responding promptly to assignment requests. Failure to do so may lead to accusations of unreasonable withholding of consent. Landlords should exercise due diligence and prioritize timely responses, fostering transparency and professionalism in tenant dealings.

Waivers Revisited: Unveiling Tenant Rights

The case highlights the importance of distinguishing between negotiation efforts and the waiver of rights. Engaging in negotiations does not automatically constitute an unequivocal intention to abandon tenant rights. Landlords must be cautious not to interpret negotiations as waiving the tenant’s right to a response from the landlord on the request for an assignment. Respecting tenant rights to a response within the specified period is essential.

Reasonable Refusals: Justification is Key

Subject to the terms of a particular lease, landlords are generally granted the authority to refuse consent to lease assignments; however, the reasons provided must meet the “reasonable” standard. Most leases provide that a landlord may not unreasonably withhold consent to an assignment. In Rabin, the court scrutinized the landlord’s reasoning for refusal and found it inadequate. To ensure compliance with the court’s guidance, landlords should base their decisions on objective and valid grounds, avoiding arbitrary refusals that could potentially lead to legal repercussions. Legal counsel can assist in evaluating whether a landlord refusal to an assignment will be considered reasonable by the courts.

Striking a Balance: Economic Impact and Commercial Realities

When faced with an assignment request from a tenant, landlords are required to consider both the economic realities of the marketplace, including the likelihood of success of the assignee’s business, and the financial impact of the assignment to the landlord. The court’s guidance in Rabin underscored the importance of evaluating the proposed assignee’s financial position and assessing the probability of default on lease obligations. In making informed decisions, landlords must weigh these factors against the tenant’s right to assign as provided in the lease.

Court Guidance for Reasonableness:

In the enthralling saga of Rabin, the Court laid down essential factors to determine whether a landlord acted reasonably in withholding consent:

  • The burden rests on the tenant to demonstrate that the refusal to consent was unreasonable.
  • The court will consider the information available to the landlord and the reasons provided by the landlord at the time of refusal for an assignment. Any subsequent facts or reasons provided are not material to the court’s decision.
  • The court will examine the relevant provisions of the lease that define the assignment and the rights of both tenant and landlord in relation to consent.
  • Depending on the circumstances, the high risk that the proposed assignee will default on its lease obligations may be considered reasonable grounds for withholding consent.
  • The financial position of the assignee may be relevant in the court’s assessment.
  • The question of reasonableness is essentially one of fact and must be determined based on the specific circumstances of the case, including the commercial realities of the marketplace and the potential economic impact of an assignment on the landlord.

Conclusion:

Rabin offers valuable insights and court-provided guidance for landlords in assessing tenant requests for assignments. Subject to the specific terms in a lease agreement, landlords are cautioned to exercise timeliness and reasonableness in responding to assignment requests. Respecting tenant rights, justifying refusals with valid grounds, and striking a balance between economic interests and the commercial landscape, will ensure landlords reduce the risk of costly litigation following a refusal to an assignment request.

For more information on this article, or for assistance with any commercial real estate matter, please contact one of the authors or another member of W Law’s experienced Real Estate group.

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landlord unreasonably withholding consent to assignment

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Commercial Landlord’s Reasonable Consent to Sublease or Assign

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  What is an Assignment of a Commercial Lease?

A commercial lease assignment occurs when a tenant transfers all of their interest in a leased property to another party prior to the expiration of the original lease. The original tenant can be released from liability in the event that the new tenant breaches the lease.

What Does it Mean to Assign a Commercial Lease?

What does it mean to sublet a commercial lease, what is a sublease of a commercial lease, can a commercial lease be assigned or subleased, what is an approval clause, what are reasonable commercial objections, do i need a lawyer if there are problems with my commercial sublease or assignment.

It is very common when businesses merge or relocate to a new location that they will be stuck with the lease of their original location. In other situations, a company may seek to assign or sublet their commercial lease when they outgrow their commercial location or they cannot make their lease payments in a timely manner.

It is common in all of these situations for the business to attempt to assign or sublet their commercial lease. The assignment of a commercial lease refers to when a party to the lease transfers all of their interests and obligations of that lease to a third party.

Usually, in commercial settings, the commercial tenant will assign their interests in the lease to another commercial tenant. In addition, a landlord may assign their interests in the lease to another landlord.

It is important to note, however, that many commercial leases will include restrictions on the ability to assign. Therefore, it is important for an individual to review their lease to determine if assigning the lease is a possibility.

The lease will outline all of the rights that the commercial tenant maintains over the property. Generally, the majority of consumer protection laws which apply to residential leases do not apply to commercial leases.

Depending on the state laws, however, restrictions on assignments of commercial leases may be valid if those restrictions are considered reasonable.

Commercial subleases arise when a company transfers a portion of their lease rights to a third party for a temporary time period. A company may either sublet a portion of their office space while they continue to work in that space or they can sublet the entire office location until the end of their lease or for a specific period of time.

For example, suppose a seasonal company, a Halloween store, signed a year-long fixed lease term, they may seek to sublet that property for the 8 months during which their store does not operate in order to generate income to pay the rent. It is important to note that, when subletting, the original tenant, called the sublessor, is still obligated to the landlord for the terms outlined in the lease.

This means that a sublessor maintains privity of estate and privity of contract with the landlord. The sublessee, or the individual or entity that utilizes the lease for a temporary period of time, is only liable to the original tenant for the terms of lease, not the landlord.

In other words, the original lease between the original commercial tenant and the landlord remains effective throughout the sublease period. In addition, the original tenant is responsible for the new tenant.

This means that the sublessee would approach the original tenant with any concerns related to the rental property and would pay rent directly to them. It has become increasingly popular for big box retail stores to sublease corners of their facilities to smaller retail stores.

This is also popular for startups which do not have enough capital to lease an entire unit and, instead, prefer to cut costs by sharing an office space with other businesses. For example, in a grocery store or a shopping center , there may be several other types of businesses subleasing from the main store, including:

  • Nail salons;
  • Ophthalmology services;
  • Cell phone repair shops;
  • Food vendors.

Other reasons a business may desire to sublease or to seek out a sublease may include:

  • Lower rates: The rate for a commercial sublease, especially a short-term lease, may be lower than lease rates;
  • Flat rental payment structure: Commercial leases often have flat rental payment structures that have no unusual surprises;
  • Fewer obligations: In commercial subleases, the sublessees typically have limited obligations to repair and maintain common areas;
  • Better bargaining position: A sublease may put the sublessee in an advantageous position when it comes to negotiating a new lease with the landlord directly, for example, when the main lease ends;
  • Less complex lease: Commercial subleases are usually not as complex as commercial leases; or
  • Additional income: One of the most common reasons for subleasing is to gain an additional source of rental income in order to make or lessen lease payments.

There are several advantages for subletting or seeking out a sublease agreement for a company. There are, however, also disadvantages for subletting a lease.

For example, being responsible for any late or missed payments from the sublessor that may cause the original renter to default on their lease with the landlord. Additionally, as noted above, as the sublessor, the business is responsible for maintaining the location and completing repairs.

If, however, the lease provides that the landlord has a duty to make repairs , then as the sublessor, the original renter will act as the intermediary to ensure that the repairs are done in a timely manner, meaning that, as a sublessee, repairs may be delayed.

A sublease of a commercial lease occurs when a commercial tenant transfers all or part of their interest in the leased property to another party prior to the expiration of the lease. The original tenant will remain liable for any damages in the event the lease is breached.

The right of a commercial tenant to assign or sublease a commercial lease is determined by the terms provided in the lease. The terms of a lease may expressly prohibit a tenant from assigning or subletting.

The terms of a lease may also allow a tenant to assign or sublease only with the consent of the landlord or if certain conditions are met. Certain jurisdictions also prohibit landlords from unreasonably withholding consent.

If there is not a provision in the lease stating otherwise, commercial leases can generally be assigned or subleased. It is important to note that the tenant’s ability to assign or sublease a commercial lease can be negotiated at the time the lease is signed or renewed.

Numerous commercial leases will contain express provisions stating that the landlord is required to consent to the assignment or sublease of the property if it is reasonable, known as an approval clause. The purpose of these clauses is to protect tenants against liability for damages or risk of forfeiture if the landlord’s consent is improperly withheld.

In general, there must be reasonable commercial objections for a landlord to withhold consent.

Landlords are permitted to withhold consent for an assignment or sublease based on several factors, including:

  • The subtenant’s suitability for the particular locale;
  • The subtenant’s suitability for the particular building;
  • Legality of the proposed use;
  • Nature of the occupancy and whether the proposed use is materially different from the use specified in the original lease; and
  • The original tenant’s failure to pay rent.

Commercial real estate can be very complex. In many cases, commercial leases are drafted by attorneys. If you are a landlord or a commercial tenant who has any issues, questions, or concerns related to a commercial sublease or assignment, it may be helpful to consult with a real estate attorney .

Your lawyer will be able to advise you of your rights and obligations under the lease. In addition, your attorney can represent you in court if necessary.

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Elektrostal , Moscow Oblast, Russia

Global Government Tenders

Most trusted source for Tendering Opportunities and Business Intelligence since 2002

The Right To Conclude An Agreement To Determine The Location Of A Part Of The Coastline (The Boundary Of The Water Body Of The Bezymyanny Stream, A Tributary Of The Khodtsa River), Flowing Through The Territory Of Land Plots With Cadastral Numbers: - 50:17:0000000:62954 At The Address Moscow Region, Pavlovo-Posadsky District, South Of The Village. Subbotino, Site 115; - 50:16:0000000:57547 At The Address Moscow Region, Noginsk Municipal District Noginskoe Forestry, Prigorodnoe District Forestry Of Parts Of Blocks 59,60,61; - 50:46:0000000:36949 To The Address Moscow Region, Elektrostal For Entering This Data Into The State Water Register And The State Real Estate Cadastre.

Joint stock company industrial innovations russia has released a tender for the right to conclude an agreement to determine the location of a part of the coastline (the boundary of the water body of the bezymyanny stream, a tributary of the khodtsa river), flowing through the territory of land plots with cadastral numbers: - 50:17:0000000:62954 at the address moscow region, pavlovo-posadsky district, south of the village. subbotino, site 115; - 50:16:0000000:57547 at the address moscow region, noginsk municipal district noginskoe forestry, prigorodnoe district forestry of parts of blocks 59,60,61; - 50:46:0000000:36949 to the address moscow region, elektrostal for entering this data into the state water register and the state real estate cadastre. in infrastructure and construction. the tender was released on nov 17, 2023..

Country - Russia

Summary - The Right To Conclude An Agreement To Determine The Location Of A Part Of The Coastline (The Boundary Of The Water Body Of The Bezymyanny Stream, A Tributary Of The Khodtsa River), Flowing Through The Territory Of Land Plots With Cadastral Numbers: - 50:17:0000000:62954 At The Address Moscow Region, Pavlovo-Posadsky District, South Of The Village. Subbotino, Site 115; - 50:16:0000000:57547 At The Address Moscow Region, Noginsk Municipal District Noginskoe Forestry, Prigorodnoe District Forestry Of Parts Of Blocks 59,60,61; - 50:46:0000000:36949 To The Address Moscow Region, Elektrostal For Entering This Data Into The State Water Register And The State Real Estate Cadastre.

Deadline - login to view

GT reference number - 74647859

Product classification - Construction work

Organization Details:

  Address - Russia

  Contact details - 565656565

  Tender notice no. - 76454545

  GT Ref Id - 74647859

  Document Type - Tender Notices

Notice Details and Documents:

Description - JOINT STOCK COMPANY INDUSTRIAL INNOVATIONS has released a Tender Notice for The Right To Conclude An Agreement To Determine The Location Of A Part Of The Coastline (The Boundary Of The Water Body Of The Bezymyanny Stream, A Tributary Of The Khodtsa R iver), Flowing Through The Territory Of Land Plots With Cadastral Numbers: - 50:17:0000000:62954 At The Address Moscow Region, Pavlovo-Posadsky District, South Of The Village. Subbotino, Site 115; - 50:16:0000000:57547 At The Address Moscow Region, Noginsk Municipal District Noginskoe Forestry, Prigorodnoe District Forestry Of Parts Of Blocks 59,60,61; - 50:46:0000000:36949 To The Address Moscow Region, Elektrostal For Entering This Data Into The

Gt Ref Id - 74647859

Type of Tender - Not Specified

Tender Notice No. - Not Provided

Deadline - Nov 28, 2023

Document Type - Tender Notices

Updates - N.A

Documents :

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The police staged a raid at a wildberries warehouse in the moscow region. migrants working there were given summonses to the military registration and enlistment office - meduza.

Police officers on the morning of November 24 staged a raid to check migrants working at the Wildberries sorting center in Elektrostal, Moscow Region.

The police, Mash reports, are checking warehouse employees' passports and marks of military service. Baza writes that after verification, some employees ar... [Short citation of 8% of the original article]

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Designed by: Nadira Filatova Website

License: free for commercial use.

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IMAGES

  1. Fillable Form Consent to Lease Assignment

    landlord unreasonably withholding consent to assignment

  2. Landlord Consent to Sublease (Free Forms)

    landlord unreasonably withholding consent to assignment

  3. LANDLORD'S CONSENT to ASSIGNMENT Form

    landlord unreasonably withholding consent to assignment

  4. Letter Of Consent From Landlord

    landlord unreasonably withholding consent to assignment

  5. Lease Assignment Form

    landlord unreasonably withholding consent to assignment

  6. Fillable Online REQUEST FOR CONSENT TO ASSIGNMENT OF LEASE To Whom It

    landlord unreasonably withholding consent to assignment

COMMENTS

  1. Unreasonably withholding consent to assign a lease

    Section 19 (1) of the Landlord and Tenant Act 1927 says that for all leases where there is a requirement on a tenant to obtain a landlord's consent before assigning, underletting or in any way changing possession of all or part of the premises, consent is not to be unreasonably withheld.

  2. PDF Decisions Applying the Reasonable Consent Standard to Assignments

    M.D. Tenn. 2002) (bankruptcy court found that land-lord did not reasonably withhold consent to assignment and sublease in bankruptcy, but noted that lease's pur-chase option remedy upon reasonable denial of consent is invalid anti-assignment provision unenforceable within bankruptcy).

  3. Assignment and Consent Standards in Commercial Leases

    If a lease simply provides that the tenant requires landlord's consent to an assignment, but does not include the standard for giving or withholding that consent, then in many states the implied standard is that the landlord's consent may not be unreasonably withheld.

  4. Landlord unreasonably withholding consent: What can you do?

    Unless it is clear from the lease that the landlord's consent must be given in a formal licence (and there has been no variation or waiver of this), a landlord may be held to have given consent in correspondence either from itself or from its agents. Are there implied obligations on the landlord not to unreasonably withhold consent?

  5. Withholding Consent to Assignment: The Changing Rights of the

    A restraint on alienation without the consent of the landlord of the tenant's interest in the leased property is valid, but the landlord's consent to an alienation by the tenant cannot be withheld unreasonably, unless a freely negotiated provision in the lease gives the landlord an absolute right to withhold consent. 2

  6. Let's Be Reasonable: Landlord Consents to Lease Assignment

    Lastly, the request to insert a demolition clause was likewise held to amount to an unreasonable withholding of consent, the court noting that it is well established that a landlord attempting to ...

  7. Dealing with Tenant Requests For Alterations And Assignment

    For example, there were exemplary damages of £25,000 in Design v Thurloe where the landlord wanted the assignment to fail to get surrender and to then re-let on better terms. ... The landlord is entitled to be told the true nature of the proposed transaction and so will not unreasonably withhold consent if this has not happened.

  8. Consent not to be unreasonably withheld or delayed…

    various remedies are available to the tenant if consent is found to have been unreasonably withheld, including a damages claim against the landlord (and as it will be a breach of statutory duty exemplary damages may be available).

  9. When can I claim that my Landlord is unreasonably withholding consent

    These include provisions such as section 19 (1) of the Landlord and Tenant Act 1927 which states that where consent to dealing with the lease is required (for example if a lease is to be assigned), consent should not be unreasonably withheld.

  10. When Can a Landlord's Consent to Assignment be Reasonably Withheld?

    Assignment provisions in a commercial lease often boil down to the following seemingly simple, but more often than not complex, standard: that the lease may only be assigned or the premises subleased with the landlord's consent, not to be unreasonably withheld.

  11. Court of Appeal Rules on "Unreasonably Withholding" Consent

    In Ontario, the Commercial Tenancies Act imposes some restrictions on tenants and landlords when assigning a commercial lease. Specifically, section 23 states that the landlord is subject to the obligation that any license of consent to an assignment is not to be "unreasonably withheld.". Section 23 (2) allows a tenant to apply to the ...

  12. Let's Be Reasonable: Landlord Consents to Lease Assignment

    Recently in 2023, the Ontario Court of Appeal in Rabin v 2490918 Ontario Inc.2 provided guidance by affirming the applicable principles for determining whether a landlord acted reasonably in withholding its consent: "The burden is on the tenant to satisfy the court that the refusal to consent was unreasonable.

  13. Can a landlord refuse to consent to an assignment because there are

    The particular problem with an assignment is that the current tenant ceases to be the tenant under the lease, and the landlord therefore loses some of its enforcement powers, even if the contractual debt remains with the outgoing tenant.

  14. Damages for landlord's unreasonable withholding of consent to assignment

    The recent High Court judgment Reid v Estreich [2022] NZHC 1433 is an interesting case in that it analyses the damages that may be claimed as a consequence of a landlord's unreasonable withholding of consent to assignment of lease.. Reid v Estreich involved a leasehold interest of rural land, pursuant to a 999-year lease with a nominal rental, which was owned by a Geraldine and Brandon Reid ...

  15. Is my landlord unreasonably withholding consent?

    Where the lease requires the landlord's consent to assign or underlet, the landlord should give consent to an assignment or underletting of lease except where it is unreasonable to do so. The landlord should give this consent within a reasonable amount of time .

  16. Withholding Consent to Assignment

    In a recent case, the court found that a landlord withholding consent for competitive reasons was not reasonable (i.e. the proposed assignee would be operating a business competitive with the landlord's nearby business). Tenet HealthSystem Surgical, L.L.C. v. Jefferson Parish Hosp. Service Dist. No. 1, 426 F.3d 738 (5th Cir. 2005).

  17. Landlord's Consent Unveiled: Exciting Lessons and Court Guidance on

    Most leases provide that a landlord may not unreasonably withhold consent to an assignment. In Rabin, the court scrutinized the landlord's reasoning for refusal and found it inadequate. To ensure compliance with the court's guidance, landlords should base their decisions on objective and valid grounds, avoiding arbitrary refusals that could ...

  18. Reasonableness of withholding consent to assign

    An update on The Royal Bank of Scotland v Victoria Street (No.3) Limited [2008] EWHC 3052 (Ch) and whether a landlord unreasonably withheld consent to the assignment of a lease.

  19. Commercial Landlord's Reasonable Consent to Sublease or Assign

    The terms of a lease may also allow a tenant to assign or sublease only with the consent of the landlord or if certain conditions are met. Certain jurisdictions also prohibit landlords from unreasonably withholding consent. If there is not a provision in the lease stating otherwise, commercial leases can generally be assigned or subleased.

  20. Can the landlord require the tenant to hand over 10% of any premium

    We have been asked to draft a commercial lease where consent to assign is not to be unreasonably withheld, but the landlord wishes to include a provision that 10% of the premium payable on the first assignment will be paid to it.

  21. Geographic coordinates of Elektrostal, Moscow Oblast, Russia

    Geographic coordinates of Elektrostal, Moscow Oblast, Russia in WGS 84 coordinate system which is a standard in cartography, geodesy, and navigation, including Global Positioning System (GPS). Latitude of Elektrostal, longitude of Elektrostal, elevation above sea level of Elektrostal.

  22. The Right To Conclude An Agreement To Determine The Location Of A Part

    The Right To Conclude An Agreement To Determine The Location Of A Part Of The Coastline (The Boundary Of The Water Body Of The Bezymyanny Stream, A Tributary Of The Khodtsa River), Flowing Through The Territory Of Land Plots With Cadastral Numbers: - 50:17:0000000:62954 At The Address Moscow Region, Pavlovo-Posadsky District, South Of The Village. Subbotino, Site 115; - 50:16:0000000:57547 At ...

  23. The police staged a raid at a Wildberries warehouse in the Moscow

    The police staged a raid at a Wildberries warehouse in the Moscow region. Migrants working there were given summonses to the military registration and enlistment office - Meduza

  24. Moscow Metro Font › Fontesk

    July 14, 2020 featured in Display. Bold Color Cool Creative Cyrillic Geometric Neon Outlined Retro. Download Moscow Metro font, a multi-line display typeface in two styles, inspired by the Moscow underground map. Moscow Metro is ideal for posters and headlines, neon signage and other artworks.