No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd

Landlord and tenant – Assignment – Consent – Sale of residential apartments held on long underleases – Whether landlord unreasonably delaying or withholding consent for assignment of underleases to purchasers – Whether conditions attached to grant of consent unreasonable – Appeal allowed The respondent was a company registered in the British Virgin Islands. It held long underleases, for terms of 999 years from 2004, of 42 residential apartments in a 33-storey building in London E14. The apartments were managed on its behalf and let on short-term assured short-hold tenancies. Each underlease contained a covenant not to assign or underlet the demised premises without the prior written consent of the appellant lessor, such consent not to be unreasonably withheld. The respondent also covenanted to pay all the lessor’s proper costs charges and expenses, including legal costs and surveyors’ fees, incurred as a result of an application by the lessee for consent or approval, whether or not consent was given. The respondent decided to sell its apartments. Problems arose in relation to sales of three of them, with the respondent claiming that the appellant had failed to comply with its duty under section 1(3) of the Landlord and Tenant Act 1988 with regard to the giving of consent to assign. The respondent brought county court proceedings seeking declarations that the appellant had unreasonably delayed consent in relation to one apartment and unreasonably withheld consent in relation to two others. The judge found for the appellant in respect of the first apartment but in favour of the respondents in respect of the others. The appellant appealed on the grounds that the judge erred: (i) in finding that it was unreasonable for the appellant to seek a bank reference; (ii) in finding that it was unreasonable for the appellant to require a survey of the premises at a cost of £350; and (iii) in finding that it was not reasonable to charge more than £350 plus VAT by way of legal fees. The High Court decided that, contrary to the county court’s view, it had been reasonable for the appellant to require a bank reference and to require the apartment to be inspected by a surveyor at a cost of £350. However, the court held that the decision regarding legal costs was open to the county court on the evidence. It followed that one of the three reasons given was unreasonable and the bad reason vitiated the two good ones, so that the appellant’s success on those two matters was not enough to render the refusal of consent reasonable: [2016] EWHC 2438 (Ch); [2017] EGLR 3. The appellant appealed. Held: The appeal was allowed. (1) The Landlord and Tenant Act 1988 imposed a statutory duty actionable in tort relating to consent being unreasonably withheld. Unlike many landlord and tenant statutes, it did not vary the tenancy by the implication of a term. The contract of tenancy remained unaltered. However, section 1(6) reversed the burden of proof at common law; and section 1(3)(b) precluded a landlord from relying upon reasons for refusing consent which were not communicated to the tenant. The duty under section 1(3)(a) was a duty to give consent “except in a case where it is reasonable not to give consent”. The “case” meant the particular situation with all its relevant facts. No doubt, as a result of section 1(3)(b)(ii), the landlord was confined to relying on the reasons that he gave in writing, but section 1(3)(a) was not itself tied to those reasons. Still less did it require that all those reasons be reasonable. That contrasted with section 1(4) which provided that giving consent subject to “any condition” that was unreasonable did not comply with the duty under section 1(3)(a). Section 1(4) did not say that refusing consent for “any reason” that was unreasonable failed to discharge the duty. In the case of a refusal of consent, the duty to give reasons under section 1(3)(b)(ii) was a duty to give “the reasons for refusing it”. That was a duty to give all the landlord’s reasons. The burden on the landlord under section 1(6)(c) in the case of a refusal of consent was a burden to show that it was reasonable for him not to grant consent. It was not a burden to show that each of his reasons for that refusal was reasonable. The notice given by the landlord under section 1(3) would be accurate and true if it stated all the landlord’s reasons for the refusal, whether they were good, bad or indifferent. Accordingly, in that context, getting the notice right meant complying with the statute; and that in turn meant that the landlord had to set out in writing all the reasons on which he wished to rely. Section 1(4) addressed only “conditions”. It did not address reasons for refusal; or, indeed, reasons for the imposition of conditions. There was nothing in the 1988 Act to suggest that a mix of good and bad reasons for a refusal of consent would automatically invalidate the refusal; and certainly nothing of that kind found its way into the Act itself. (2) Where a refusal of consent to an assignment was based on a number of reasons, the fact that one of those reasons was bad would not normally render the refusal unreasonable, assuming that the other reasons were good. Ultimately, it was a question of considering the covenant and the refusal of consent in each case. Thus, it might be clear that the bad reason was by far the most important reason, and that the purportedly good reasons were merely makeweights; or it might be that the existence of the bad reason infected or vitiated what would otherwise, in the absence of the bad reason, be a good reason. If the decision would have been the same without reliance on the bad reason, then the decision (looked at overall) was good. In that situation the bad reason would not have vitiated or infected the good one. In the present case, the question was whether the decision to refuse consent was reasonable; not whether all the reasons for the decision were reasonable. Where, as here, the reasons were free-standing reasons each of which had causative effect, and two of them were reasonable, the decision itself was reasonable: BRS Northern Ltd v Templeheights Ltd [1998] 2 EGLR 182 followed. British Bakeries (Midlands) Ltd v Michael Testler & Co Ltd [1986] 1 EGLR 64 considered. Martin Hutchings QC and Jonathan Wills (instructed by Trowers & Hamlins LLP) appeared for the appellant; Jonathan Seitler QC and Lina Mattsson (instructed by Penningtons Manches LLP) appeared for the respondent. Eileen O’Grady, barrister Read the transcript No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd