Summary

Business tenant's application for a declaration that the landlord's withholding of consent to an assignment of a lease of a warehouse to Safeway Stores Plc was unreasonable.

Facts

Application by the plaintiff tenant for a declaration against the 1st defendant as the original landlord and the second defendant as assignee of the reversion under an assignment dated 31 October 1997 that the first defendant had unreasonably refused its consent to the assignment of the tenant's lease dated 4 September 1978 of land together with a warehouse at George Street Lutterworth to Safeway Stores Plc. The warehouse formed a substantial part of a site ("the first site") in respect of which planning permission had been obtained for a supermarket development; immediately adjoining another site ("the second site") in respect of which planning permission for development as a supermarked had also been obtained, Sainsbury being associated with the first site and Safeway with the second site. The lease to the plaintiff was for a term of 25 years from 25 March 1978 at a rent currently at #105,000 pa. The lease contained two covenants of relevance, the first being as to user as a warehouse and distribution depot with ancillary offices and excluding the use of any part for the sale by retail of any goods whatsoever. The second covenant was against assignment without the previous consent in writing of the landlord, such consent not to be unreasonably withheld.

Held

In every case concerning the withholding of consent by a landlord to an assignment, it was a question of fact, depending on all the circumstances whether the landlord's consent was being unreasonably withheld - International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd (1986) 1 Ch 513. This area of the law had been substantially enlarged by the Landlord and Tenant Act 1988 so that the onus of proof is on the landlord who has to justify his refusal of consent as being reasonable in the light of s.1(6). Although this was intended to benefit the tenant it ironically bestows on the landlord the forensic advantage of the right to open and the right to the last word in cases like the present one. On the evidence the court concluded that the 1st defendant's belief that the prospect of obtaining planning permission for the first site would be detrimentally affected by the proposed assignment was reasonable by reference to the time at which the refusal was communicated and it was genuine. On the other hand the reason given that the proposed assignment would involve an authorised change of use was a bad reason. It was quite clear from the evidence that it was not a reason in the mind of Mr Zweibel at the time of refusing consent and as a matter of law it was bad. There was no ground for thinking that Safeway intended to use the warehouse in breach of the user covenant and the covenant was a negative one so that there would have been no question of any breach if Safeway had not used the warehouse at all. The right of approach of a landlord who feared that the proposed assignee would use the premises unlawfully was to approve the assignment and exercise his rights in relation to breach of the user covenant, if and when that became appropriate. However on the balance of hardship the fact was that the plaintiff had no further use for the premises and was keen to surrender the lease until Safeway indicated their interest in taking the assignment at the end of May 1997. In the event, for these and other reasons the application would be dismissed.