Landlords: Beware of inadvertently granting consent to a tenant.
JUNE 2009
Landlords must be careful what they say when approached by a tenant for consent under a lease. Two recent cases confirm that heading correspondence “subject to licence” or granting “in principle” consent may inadvertently lead to consent being granted. It seems, following the latest decision, that this is the case despite solicitors explicitly stating within the correspondence that it does not constitute consent.
Subject to licence and in principle consent
The case Aubergine Enterprises Ltd v Lakewood International Ltd (2002) dealt with a sale agreement which was conditional upon the landlord’s consent to assign the leasehold interest. Correspondence from the landlord’s solicitor was headed “subject to licence” and contained a statement of four conditions which had to be satisfied. The court held that such headings and statements “did not qualify the plain indication of consent in the body of the letters” and therefore did not render such consent equivocal or uncertain.
The letters also granted “in principle” consent which the court held to constitute clear consent in writing (subject only to the four conditions, three of which had already been satisfied).
Consent despite clear expression to the contrary
Alchemy Estates Ltd v Astor (2008) also dealt with a proposed assignment of leasehold premises. In this case, the landlord’s solicitor sent an email stating that his client was prepared to grant consent in principle subject to costs being paid and the consent being documented within a licence to assign. He also stated within the email:
“Please note that this correspondence does not constitute the provision of consent by our client. Such consent will only be provided on the completion and delivery of a formal licence executed as a deed.”
The court observed that this email provided the relevant consent. It added that the expression of consent satisfied the relevant test for landlord’s consent and was unequivocal. What surprised many was the fact that this conclusion was reached despite the email from the landlord’s solicitor expressly stating that such correspondence did not constitute consent.
The current position
It is now clear that landlords and their agents and solicitors must not give “in principle” consent, or even indicate that consent may be forthcoming, until they are ready to do so. In addition, although these cases dealt with licences to assign, it is reasonable to assume that the same points will apply to applications for consent for alterations, underletting or any other consents required under a lease.
Practical advice following receipt of an application
The Landlord and Tenant Act 1988 imposes a duty on landlords not to unreasonably delay giving consent following an application by the tenant. As a result, we recommend that you forward any requests for consent to your solicitor as soon as possible (within a few days of receipt). In the meantime, it is essential that you (or your solicitor) do not give any indication whatsoever about the likelihood of consent being granted. The safest approach may be to say that the request has been received and is currently being considered. Your solicitor should then discuss the application with you, consider the lease and, if necessary, request further details from the tenant or the proposed assignee. Upon receipt of such further information, you can properly decide whether or not to grant consent and what conditions, if any, are to be imposed. At that point, your solicitor can issue a draft licence to assign, clearly setting out any conditions required, and make it clear that consent will not be granted until the licence has completed.
If you would like further information on the content of this article please
contact Lynne Horay on 0207 404 0606 or lhoray@gdlaw.co.uk.
This is a guide for general information and interest and should not be relied upon as providing specific legal advice. |
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