Acting reasonably over consent applications

Lease restrictions come in various forms and there is a range of statute and case law relating to how they operate. This can cause problems for both landlords and tenants, but the general principles surrounding the reasonableness of landlords’ refusal seem to be standing the test of time, as two recent High Court cases surrounding consent for alterations have demonstrated. 

These cases – Messenex Property Investments Ltd v Lanark Square Ltd [2024] EWHC 89 (Ch); [2024] EGLR 11 and Jacobs v Chalcot Crescent (Management) Company Ltd [2024] EWHC 259 – act as useful reminders of some key points for landlords in particular. They are also a warning not to be complacent when refusing consent. 

Unlike with alienation, the burden of proving unreasonableness rests with the tenant in cases of consent to alterations. Nonetheless, Messenex and Jacobs both serve as an important warning to landlords of the need to express clearly any reasons for refusing a tenant’s application for consent to alter.

In Messenex, the court concluded that the landlord acted reasonably in withholding consent to major alterations to premises as the tenant did not comply with requirements to provide, and obtain approval of, preliminary structural engineer’s plans for the proposed works.

In Jacobs, the landlord had not clearly identified its reasons for refusing consent to alter and the High Court granted a declaration that the landlord had unreasonably withheld consent on the basis that (1) it had failed to plead the distinct basis of objection to the alterations; and (2) its concern around the structural integrity of the building was not a reasonable ground of refusal. The court felt that no reasonable landlord would have withheld consent on the ground of risk of structural damage without a supporting expert opinion. 

Top takeaways

1. It is important to highlight that each case is unique and will turn on its own facts. The reasonableness of a landlord’s decision must be judged against the specific circumstances. While the burden of proof in consent for alterations cases is reversed (in that it is for the tenant to prove that the landlord has acted unreasonably in refusing consent), landlords should bear in mind that reasons relied on for refusing consent must be objectively reasonable, ie, ones which a reasonable landlord might put forward for refusing consent.
2. Not all reasons for a landlord refusing consent may be deemed valid but, in Messenex, the fact that some of the landlord’s conditions for refusing consent had been unreasonable did not invalidate its other reasons. This reinforces previous decisions such as No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250; [2018] EGLR 16 whereby a “bad” reason for refusing consent should not undermine a “good” reason.
3. Messenex indicates that landlords may be able to reasonably refuse consent if tenants fail to agree to cover reasonable costs associated with their application for consent. (This was agreed between the parties in Dong Bang Minerva (UK) Ltd v Davina Ltd [1996] 2 EGLR 31 and therefore not decided.) Holding and Management (Solitaire) Ltd v Norton [2012] UKUT 1 (LC); [2012] 2 EGLR 53 confirmed that this can be possible even where a lease does not contain an express costs recovery clause.
4. Tenants should present landlords with as much information as possible to consider their application (including professional structural drawings, if appropriate). Messenex shows that, where insufficient information is provided by tenants, it is likely to be reasonable for landlords to request such information and to otherwise withhold consent.
5. In Jacobs, the judge observed that the landlord could have taken the alternative approach of giving consent subject to conditions intended to mitigate any risks believed to exist and that landlords should consider this alternative to refusing consent entirely. A landlord’s blanket refusal may be unreasonable if there is an obvious way to alleviate a legitimate concern.
6. Landlords and tenants should not entangle separate issues when dealing with consent applications. The judge highlighted in Messenex that unrelated matters (such as outstanding service charges) should not be used as leverage against tenants when considering applications for consent. The question is whether a separate breach of covenant is of a nature which justifies the refusal of consent, and whether the landlord has been prejudiced by the breach. This illustrates the test for reasonableness laid down in International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 EGLR 39.
7. Landlords should act promptly when a request for consent is received. What is considered a reasonable time depends on the facts of each case, but case law has tended towards decisions being given within weeks rather than months, eg Go West Ltd v Spigarolo [2003] EWCA Civ 17; [2003] 1 EGLR 133 and NCR Ltd v Riverland Portfolio No 1 Ltd (No 2) [2005] EWCA Civ 312; [2005] 2 EGLR 42. This should focus landlords’ attention on the importance of managing efficiently the process of responding to a consent application.
8. If a landlord relies on the advice of a third party, that advice must be reasonable, and a landlord should obtain appropriate expert evidence that will withstand scrutiny at trial. Landlords should therefore carefully examine the reasonableness of any professional advice received and check that their surveyor has the appropriate expertise to advise.

This article was first published in Estates Gazette on 15 April 2024.