Covenants restricting assignment and subletting are covenants by the tenant (also known as covenants ‘restricting alienation’) and are commonly included in leases so that the landlord can keep control over what happens to the property. Th ell will be very worried ifit appears that the assignee cannit afford the rent. Clearly having doing so will have implications on the property nad know who the tenant is if he will be able to fulfil the obligations.
Covenants restricting alienation can be absolute, whereby the tenant cannot part with possession if the landlord insists on enforcing the covenant or qualified in which case the tenant cannot assign or sublet the property without the landlords consent. Under the Landlord and Tenant Act 1927 s.19 (1), if a tenant requests the landlords consent under a qualified covenant that consent cannot be unreasonably withheld. The consent can only be withheld if it is reasonable to do so.
Where a Landlord receives a written application for consent he must reply within a reasonable time, giving written notice of his decision and if he refuses consent or places conditions on any consent then he must give reasons for doing so under the Landlord and Tenant Act 1988 s.1
Under the Landlord and Tenant Act 1988 s.1 (6), a written application shifts the burden of proof on the landlord to show any refusal is reasonable or any consent or refusal is given within a reasonable time. If he fails to respond within a reasonable time, or unreasonably refuses consent then the tenant has the right to assign ( take the risk or get a court declaration) and to an action in tort for the Landlords breach of his statutory duty. A month may be within a reasonable time but only just; Go West Ltd v Spigarolo; NCR Ltd v Riverland Portfolio No1 Ltd. The court can only asses what a reasonable time is in retrospect with the benefit of hindsight; Go West v Spigarolo; Norwich Union life Insurance v Shopmoor Ltd.
Furthermore, the landlord can only reasonably refuse consent if his reasons for doing so relate to the assignees or subtenants character (being an undesirable tenant) or the use of the property (to prevent undesirable use). Houlder Bros v Gibbs; International Drilling Fluids Ltd v Louisville Investments Ltd. (such as unsatisfactory references or financial standing or intended use of premises which might interfere with Landlord’s developments of them.
Balcombe LJ in Drilling stated 7 propositions of law. Ashworth Frazer Ltd v Gloucester City Council, emphasised grounds 2, 4 and 7 from Drilling. According to Ashworth Frazer Ltd v Gloucester City Council, and Drilling, footwear refusal does not have to be justified, merely reasonable in the circumstances. In Design Progression v Thurloe properties ltd (No2) reasonableness is a question of fact, depending on all the circumstances.
According to Drilling the ground for refusal reasons must relate to the landlord and tenant relationship and to the subject matter of the lease. To be reasonable they must be intrinsic to the landlord and tenant relationship and not purely personal or collateral. In Houlder Bros v Gibbs, business competition did not constitute to a reasonable ground as it was a collateral reason. However, there is conflicting authority for circumstances where the use of the premises may constitute a direct threat to the landlord’s own business; Whiteminister Estates Ltd v Hodges Menswear Ltd; Bromley Park Gardens Estates v Moss; Sportoffer Ltd v Erewash Borough Council. Mentioned before If the assignment would be detrimental to the leasehold property itself that would justify refusal. If it would have an effect on other property belonging to the landlord that would not be a valid reason. The objection to the use itself could be valid, even if not contrary to a user covenant in the lease. Note also ground 6 consequences to tenant... Maybe reasonable to refuse consent on basis that landlord believes proposed asigness will use premesis for a purpose that will breach a user covenant.
If Landlord fails to reply within a reasonable time he must give consent. Landlord are required to give full reasons in writing. They cannot later rely on reasons not given at the time or merely given by phone. Footwear Corp. Ltd v Amplight Properties ltd; Norwich v Shopmoor. The acertation that the proposed assignee would be ‘unsuitable’ without more is not enough. Furthermore, the Landlord cannot rely in court on reasons for refusal given only orally or other then those given in writing.
In the case of ‘a qualifying lease’ i.e. a non qualifying lease granted after 1995, a Landlord may stipulate the circumstances for refusal and stipulate conditions for consent in the lease. Any refusal or imposition of conditions based on such stipulations will automatically be reasonable; Landlord and Tenants (covenants) Act 1995 (LLTCA 1995) s.22; and LTA 1927 s.19 (1a). Wallis Fashion Group Ltd v CGU Life Assurance Ltd.
Landlord and Tenants (covenants) Act 1995 (LLTCA 1995) s.22; amends LTA 1927 s.19 (1a)
It appears that a balance has been struck according to the limitations imposed by the statute on the landlord to refuse to assign and sublet.