The Court of Appeal has recently considered whether a landlord was reasonable in refusing to provide consent to an assignment of a commercial lease.

Facts

The decision of the Court of Appeal in Singh v Dhanji and another [2014] All ER (D) 135 concerns a dispute which arose between the claimant tenants (the “Tenants”) and defendant landlord (the “Landlord”) under a commercial lease of a dental practice (the “Lease”).

The Landlord refused to provide the Tenants his consent to an assignment of the Lease unless the Tenants first satisfied a number of conditions. Specifically, the Landlord demanded that the Tenants:

remedied their alleged breaches of covenant;
notified him so that he could inspect the rectification that had been carried out; and
stopped trespassing on his adjoining premises.

The Tenants brought proceedings against the Landlord on grounds that he had breached his statutory duty by unreasonably refusing his consent to the assignment of the Lease.

At first instance, the judge found that the Landlord’s conditions for permitting the Tenant’s assignment of the Lease were unreasonable. The judge found that the alleged breaches of the Lease were not so serious as to warrant the imposition of the above conditions. Though there was found by the judge to be little information available to assess damages, the Tenants were awarded £183,000 in damages plus £31,000 interest.

The Landlord appealed the judge’s decision on grounds that the judge had erred in relying on the fact that the alleged breaches by the Tenants had not been proven. It was also submitted by the Landlord that the judge had erred in assessing the damages awarded to the Tenants.

The Decision

The Court of Appeal was convinced by the judge’s finding that, even if proved, the breaches of covenant by the Tenants had not been so serious as to justify the conditions which the Landlord sought to attach to his consent. The Court of Appeal also found that the Landlord would not have been prejudiced had the alleged breaches not been remedied. Whilst recognising the difficult circumstances of the case, the Court of Appeal did not consider the judge at first instance to have erred in his assessment of damages either. Accordingly, the Court of Appeal dismissed the Landlord’s appeal.

Conclusion

The decision of the Court of Appeal is a reminder to landlords that they must have strong grounds for refusing a tenant’s request to assign a lease before doing so. The decision will be welcomed by tenants and mortgagees in possession seeking to assign their leasehold interests.

For further information, please contact Georgina Squire or the Partner with whom you usually deal.