Summary

A right-to-manage company's failure to give consent to the assignment of a lease did not amount to an unreasonable withholding of consent within the meaning of the Landlord and Tenant Act 1988 s.1 where it had not complied with its obligation under the Commonhold and Leasehold Reform Act 2002 s.98(4) to give the lessor 30 days' notice, thereby enabling the lessor to object.

Facts

The lessee of a flat appealed against a determination that she had breached a covenant in her underlease by parting with possession of the flat to the second appellant (W) without the respondent lessor's consent.

The covenant provided that the appellant was not to sublet or part with possession of the flat except with the lessor's consent. The management of the property had been taken over by a right-to-manage company. Under the Commonhold and Leasehold Reform Act 2002 s.98 and s.99, responsibility for giving or withholding consent was vested in the company. However, the company was not permitted to give consent without first giving 30 days' notice to the landlord, thereby enabling the landlord to object. The appellant exchanged contracts with W for the sale of the flat to him. At the relevant time, W was the sole director of the company. Under the contract, W was required to give notice to the lessor. The company did not give notice because W was concerned that the lessor would object. Further, the company neither consented nor expressly refused consent to the assignment. The appellant purported to complete the assignment in return for the purchase price paid by W and moved out with all her possessions. Subsequently, the lessor objected to the assignment and applied to the Land Registry to register a restriction preventing registration of the assignment. The lessor applied successfully to the First-tier Tribunal under s.168(4) for a determination that the appellant had breached the covenant. That decision was remade by the UT, but the same conclusion was reached. It was common ground that, unless and until the assignment was registered, there had been no "assignment" to W for the purposes of the covenant.

Held

Did the appellant part with possession for the purposes of the covenant when the contract to assign was completed? Yes. It was an inescapable conclusion that she had parted with possession to W on completion of the sale. She comprehensively gave up physical possession and control to him by removing all her belongings and delivering the keys to him. Equally comprehensively, she ceded all legal right to possession by completing her right to assign her interest as lessee. The flat had also been sold with vacant possession, Clarence House Ltd v National Westminster Bank Plc [2009] EWCA Civ 1311 applied. It was nothing to the point that, unless and until the transfer was registered, the appellant remained in law the lessee. The assignment was complete in equity and, as bare trustee, she was required to exercise her legal rights as lessee only in accordance with W's instructions and she was entitled to be indemnified by him against all liabilities and entitled to require him to perform all her obligations as lessee (see paras 38-40 of judgment).

If yes, was the company's failure to give consent an unreasonable withholding of consent within the meaning of the Landlord and Tenant Act 1988 s.1? No. Once there were no grounds for reasonably refusing consent, there was a positive statutory duty on the company to give consent. However, an RTM company was expressly prohibited by s.98(4) of the 2002 Act from giving consent until 30 days' notice had been given to the landlord. It followed that, until such notice had been given, the company could not be under that positive duty and there could not be an unreasonable holding of consent by it, Norwich Union Life Insurance Society v Shopmoor Ltd [1999] 1 W.L.R. 531 considered. That conclusion did not prejudice the position of a lessee, such as the appellant, who had applied for consent from an RTM company. Section 107 of the 2002 Act entitled "any person interested", which would include such a lessee, to apply to court for an order requiring "a person who has failed to comply with a requirement imposed on him by ... virtue of any provision of this Chapter to make good the default within such time as is specified in the order". A lessee could therefore apply for an order that an RTM company fulfil its duty of giving notice of the request to the lessor. It would be surprising if it was not part of standard conveyancing practice for solicitors or others acting for a selling lessee, where an RTM company was in place, to require evidence that the necessary notice had been given. Lessees might seek to protect themselves by requiring the provision to them of evidence that notice had been given the RTM company and that the lessor had raised no objection within the 30-day period (paras 52-56).

Appeal dismissed