What can a tenant do where a landlord fails to progress an application for consent to alterations or change of use? Miriam Seitler, Landmark Chambers

 

What can a tenant do where a landlord fails to progress an application for consent to alterations or change of use?

 Miriam Seitler – Landmark Chambers

May 2018

When considering the topic of landlord’s consents, it is important to distinguish between applications for consent for (1) alienation, (2) alterations/improvements and (3) change of use. The statutory protection available to a tenant is different depending on which category of consent is being sought. This article contrasts the tenant’s protections when dealing with alienation to those for alterations and change of use. It offers a step by step guide to a consent application, particularly for alterations and change of use – where the tenant cannot rely on the landlord’s statutory duties found in the Landlord and Tenant Act 1988. It deals with tips, tactics and remedies for tenants.  

Introduction

 

  1. When considering the topic of landlord’s consents, it is important to distinguish between applications for consent for (1) alienation, (2) alterations/improvements and (3) change of use. The statutory protection available to a tenant is different depending on which category of consent is being sought. This article contrasts the tenant’s protections when dealing with alienation to those for alterations and change of use. It offers a step by step guide to a consent application, particularly for alterations and change of use where the tenant cannot rely on the landlord’s statutory duties found in the Landlord and Tenant Act 1988. It deals with tips, tactics and remedies for tenants.

 

Distinguishing different applications

 

  1. Where a tenant covenants not to undertake a certain step without the landlord’s consent, the obligations on landlords and tenants vary depending on what step the consent is sought for. There are three types of application for consent by tenants that enjoy certain statutory protections and qualifications – alienation, improvements and change of use.

 

  1. These are not the only applications for consent that a tenant can make – see the recent decision in Rotrust Nominees Limited v Hautford Limited [2018] EWCA Civ 765 where the lease required the tenant to obtain the landlord’s consent to an application for planning permission. However, it is these three categories of application that bring into play the statutory overlay.

 

  1. In general terms, a tenant enjoys the greatest level of statutory protection when making an application for consent to alienation, i.e. sub-letting or assignment. The tenant receives some lesser protection for an application for consent to make improvements to the demised premises. The tenant enjoys the least statutory protection for applications for consent to change of use of the premises. Each will be considered in turn.

 

Applications for consent to alienation

 

  1. Where a tenant covenants not to assign and/or underlet the premises without the landlord’s consent, the tenant benefits from the following statutory provisions:

 

  1. The covenant will be further qualified so as to provide that the landlord’s consent is not to be unreasonably withheld (s.19(1), Landlord and Tenant Act 1927);
  2. The landlord will have a positive duty to give a decision, with reasons, within a reasonable time from the date of the tenant’s written application for consent (s.1(3), Landlord and Tenant Act 1988). Breach of this positive duty will amount to breach of statutory duty for which the tenant can recover damages (subject to proving loss);
  3. The burden of proof will be on the landlord to establish that any withholding of consent is reasonable, any conditions imposed are reasonable and the decision was given within a reasonable time (s.1(6), Landlord and Tenant Act 1988);
  4. The landlord can only rely on reasons that he actually gives in his written decision refusing consent: Footwear Corporation Ltd. v. Amplight Properties Ltd. [1999] 1 WLR 551, approved in Go West v. Spigarolo [2003] QB 1140 (CA).

 

Application for consent to improvements

 

  1. In contrast, a tenant applying for consent to alterations will enjoy lesser statutory protection and only if the proposed alterations can be regarded as improvements. Improvements include any change to the demised premises which is of benefit to the tenant and/or renders the demised premises more convenient and comfortable to the tenant, judged from the perspective of the tenant: FW Woolworth and Co v Lambert [1937] Ch 37.

 

  1. If the lease contains a covenant that the tenant will not carry out alterations without the landlord’s consent (a qualified covenant) the covenant will be further qualified (in respect of an application for consent to improvements) providing that the landlord’s consent is not to be unreasonably withheld (s.19(2), Landlord and Tenant Act 1927).

 

  1. None of the additional protections found in the 1988 Act (positive duty on landlord giving rise to damages, burden of proof reversed, decision in a reasonable time etc.) apply to applications for consent to improvements.

 

Application for consent to change of use

 

  1. The tenant enjoys the least protection in respect of applications for consent to change of use of the premises. If the covenant is qualified (i.e. the tenant cannot change the use of the premises without the landlord’s consent) s.19(3) of the Landlord and Tenant Act 1927 provides that a landlord may not impose a fine in respect of the application.

 

  1. No other statutory protection applies. Therefore, unless the lease itself provides that the landlord’s consent is not to be unreasonably withheld, there is no statutory provision that will imply such a proviso. The landlord will be able to refuse consent arbitrarily. The 1988 Act does not apply.

 

How can the tenant strengthen its position where the1988 Act does not apply?

 

  1. The issue therefore arises – where the landlord does not have the duties imposed by the 1988 Act, how can a tenant strengthen its position and pressure the landlord to progress an application for consent? This arises in applications for consent to improvements and/or change of use where, as explained, the 1988 Act is of no application.

 

  1. The following six steps outline how a tenant should approach an application for consent, particularly where the 1988 Act does not apply.

 

Check the lease for helpful express terms

 

  1. The first step is to check the express terms of the lease. It will be important to ascertain whether the covenant is absolute (e.g. the tenant cannot make alterations), partially qualified (e.g. the tenant cannot make alterations without the landlord’s consent) or fully qualified (e.g. the tenant cannot make alterations without the landlord’s consent, such consent not to be unreasonably withheld.)

 

  1. It is also possible that the lease contains an express positive duty on the landlord not to withhold consent unreasonably. This is to be contrasted to the normal form of qualification of a tenant’s covenant. The former is more powerful, from a tenant’s perspective, but is very rare.

 

  1. For those drafting leases for tenants, it is advisable, particularly in respect of a covenant relating to change of use, to make the covenant fully qualified. As explained, the statutory overlay will not help a tenant here by implying a proviso.

 

  1. Further, it is worth looking out for (or drafting, as the case may be) a proviso that the landlord’s consent is not to be unreasonably withheld or delayed. The reference to unreasonable delay will make it easier, later on, to pressure the landlord for timely responses.

 

Failing that, does any implied statutory proviso apply?

 

  1. In the absence of an express fully qualified covenant, it will be necessary to consider whether the Landlord and Tenant Act 1927 will imply a proviso. As explained above, the statute will only do so for alienation and improvements, not for change of use. Further, the statutory provisos only apply to qualified covenants, not absolute covenants.

 

If no statutory proviso applies, can a proviso be implied at common law?

 

  1. It is unlikely that a proviso (that the landlord’s consent is not to be unreasonably withheld) can be implied at common law. Although such implication was given support in obiter dicta of Megaw LJ in Bocardo SA v. S&M Hotels Ltd. [1980] 1 WLR 17, 22 (CA), it has more recently been held, by Mervyn Davies J, that a court will refuse to imply such a term: Guardian Assurance Co. v. Gants Hill Holdings Ltd [1983] 2 EGLR 36. The Court reasoned that where the lease has been drafted in the context of the Landlord and Tenant Act 1927, the parties would have known in what circumstances the statute would have translated a partially qualified covenant into a fully qualified covenant. Any failure to expressly qualify covenants in the lease can therefore be interpreted as demonstrating a deliberate intention on behalf of the parties to allow the landlord’s discretion not to be subject to the test of reasonableness.

 

19.  In light of the Supreme Court’s recent reluctance to imply terms (see Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72), it is considered that a Court would be unlikely to imply the relevant proviso where it does not expressly appear and where no statutory qualification applies.

 

If an express/implied proviso applies such that consent is not to be unreasonably withheld, does this also mean that a decision cannot be unreasonably delayed?

 

  1. Although there is no general common law duty on the landlord to give a decision within a reasonable time, it is certainly not the case that a landlord can endlessly deliberate and string out the application for consent, even where the 1988 Act does not apply.

 

  1. It has been held in a number of cases that a withholding of consent does not only refer to a refusal of consent, but also to a failure to give a decision at all where it would be reasonable to grant consent. For example, see Lewis & Allenby (1909) Ltd v Pegge [1914] 1 Ch 782 concerning a covenant by the lessee not to “assign, underlet, transfer or part with the possession of the flat without the consent of the landlords, such consent not to be withheld in the case of a respectable and responsible person”. An application had been made by the tenant to sub-let the premises. The tenant received no response from the landlord and went ahead and sub-let. Neville J held:

 

“It appears to me, dealing with the words which I find in this covenant, that, as such consent is not to be withheld in the case of a respectable and responsible person, if the lessee applies for such consent and within a reasonable time that consent is not granted, then within the meaning of the covenant it is withheld, and the lessee will not lose his property if he assigns to the person whose name he has given to the landlord.”

 

  1. The period of 11 days between the request for consent and the sub-letting with no landlord response was regarded as a reasonable time. The landlord did not argue at trial that the sub-lessee was not a respectable and responsible person. Therefore, although questions of reasonableness did not come into the discussion, because of the wording of the covenant, the court understood the term “withholding” to encompass a failure to give a decision either way.

 

  1. As such, where a reasonable time has passed since the tenant made the application (and has provided all the information reasonably necessary for the landlord to decide upon the application) and the landlord has failed to give a decision either way, this will amount to a withholding of consent.

 

  1. Similarly, in City Hotels Group Ltd v Total Property Investments Ltd [1985] 1 EGLR 253, Judge Paul Baker QC, sitting as a judge of the High Court, considered the effect of a considerable passage of time since the tenant’s application. The landlord had not refused consent but simply strung out the correspondence with requests for information. Although a case concerning an application for assignment, it predated the 1988 Act and therefore demonstrates the position where the 1988 Act does not apply. It was held that although the landlord may not have been unreasonable in the substance of its request for further information, the fact that this request came 3 months after the original application by the tenant meant that the landlord was unreasonably withholding consent – see p.257:

 

“The tenants were entitled to have the matter dealt with expeditiously, having made their application, and the landlords were supplied, as I find, with full information about it. Had this letter of March 7 been sent within a reasonable time after the letter of December and the accounts in January, had it been sent, say, in place of the letter that has been sent about the accounts on January 24, it may well be that one could readily find that the landlords were not being unreasonable, applying the test in the Pimms case, in pressing for some further assurance on the lines of this letter. But to leave it until March 7 before they finally formalised what is worrying them seems to be far too late.”

 

  1. This decision is supportive of the view that even a reasonable request for information will amount to an unreasonable withholding of consent where it is made too late after a reasonable time has passed from the application.

 

Laying the groundwork for later on: tips and tactics

 

  1. From before the application is made, the tenant will need to act tactically to strengthen its position.

 

  1. The tenant should ask for consent in writing, in clear and unambiguous terms. This is so as to leave no uncertainty as to when the application has been made and what it proposes. The reasonable time for a landlord’s decision will start to run from the date of the formal application, provided the landlord has been given enough information to make the decision. The tenant should include as much information as he can in his initial request for consent and anticipate what information the landlord will reasonably require to determine the application, rather than allowing the landlord to buy time and delay matters by having to ask for it.

 

  1. If the landlord asks for further information, a tenant should supply it quickly, but ask why the landlord wants it; this may help to anticipate a poor ground for refusal but stop the landlord from dragging things out. If the tenant thinks the landlord is using delaying tactics, a tenant should say so openly, but supply any potentially irrelevant documents, expressly without prejudice to the contention that the landlord is delaying. When supplying information, a tenant should expressly state that it is additional to the existing application, to reduce the risk of the landlord trying to argue the tenant has made a fresh application.

 

  1. When chasing for a response, it is a good idea to impose a deadline, without prejudice to the contention that a reasonable time has already expired. There is a risk that imposing a deadline without more would allow the landlord to argue that the tenant had effectively set a minimum date for when a reasonable time had passed.

 

Remedies available

 

  1. A tenant has two possible remedies for unreasonable withholding of consent where the 1988 Act does not apply. Damages are not available in the absence of a (rarely found) express landlord covenant not to withhold consent unreasonably.

 

  1. First, the effect of an unreasonable withholding of consent is that the proviso is lifted so the tenant is entitled to carry out improvements or change the use without the need for the consent. However, it can be risky to alter/change use without consent in this scenario. If the landlord is later found to have been reasonable in withholding consent, the tenant will be in breach of covenant and at risk of forfeiture of the lease.

 

  1. Second, the tenant can seek a declaration that the landlord has unreasonably withheld consent before altering/changing use. A declaration can be sought by way of summary judgment. An expedited hearing might be preferable if there is doubt as to the ability to satisfy the summary judgment test. If there is minimal dispute of fact, a Part 8 claim would be appropriate. Declarations can be sought in the County Court – see s.53(1), Landlord and Tenant Act 1954.

 

 

MIRIAM SEITLER

LANDMARK CHAMBERS

MAY 2018

 

This paper is made available for educational purposes only. The views expressed in it are expressed by the author purely to stimulate and promote debate.  The contents of this paper do not constitute legal advice and should not be relied on as such advice.  The author and Landmark Chambers accept no responsibility for the accuracy or continuing accuracy of the contents.

 

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