Failing to consent to assign in time

Sometimes a judgment is handed down that makes one put on the kettle, make a brew, reach for the biscuits and hunker down comfortably in anticipation of a good read. Gabb v Farrokhzad [2022] EWHC 212 (Ch); [2022] PLSCS 26 is one such case. The heart of the matter Harry Gabb was the long leaseholder of a flat situated on Kensington Park Road. The freehold owner of the building was Meghdad Farrokhzad. In October 2020 Gabb first asked Farrokhzad for permission to assign the lease. As at January 2022 consent to assign had not been granted. As Judge Gleeson stated “the question as to why not was at the heart of the trial”. The lease contained a fully qualified covenant restricting Gabb’s right to assign without landlord consent, such consent not to be unreasonably withheld. At common law where a landlord unreasonably withholds consent, the tenant is at liberty to assign without consent and may seek a declaration to that effect. Section 1(3) of the Landlord and Tenant Act 1988 imposes a similar obligation on the landlord. If a tenant complies with section 5(2) and serves the landlord with a written application for consent to assign the landlord must give consent, save where it is reasonable not to do so. Additionally the landlord must serve the tenant with written notice of its decision. The key issues the High Court had to resolve were whether Gabb had in fact made a compliant application to assign; and, if so, whether Farrokhzad had acted unreasonably in withholding consent. The requests Since October 2020, Gabb had made three separate requests to assign his lease. Only his last two applications were relevant to the claim. On 25 February 2021, Gabb’s solicitors had emailed Farrokhzad requesting consent to assign the lease. The request followed an offer of £3.25m that Gabb received for the flat. After the sale fell through, Gabb received a further offer to purchase the flat for the sum of £3.2m. The offer was made by a member of the Oppenheimer family who founded the diamond mining company, De Beers. By way of a letter dated 22 October 2021, Gabb’s solicitors wrote to Farrokhzad seeking consent to assign the lease. Farrokhzad argued that Gabb’s applications for consent to assign had not been made in accordance with the 1988 Act. Judge Gleeson paid short shrift to this contention. Sections 1(3) and 5(2) provided that for an application to be valid, it had to be “written” and “served in any manner provided in the tenancy”. If the tenancy made no provision, it had to be served in any manner provided by section 23 of the Landlord and Tenant Act 1927.  It was not disputed that the communications requesting consent to assign were sent by Gabb and had been received by Farrokhzad. Further, the requests made by email constituted “written” requests as defined within schedule 1 of the Interpretation Act 1978 and recent guidance and legal statements. The High Court found that the applications for consent to assign had been properly served in accordance with the lease. Section 5(2) of the 1988 Act gave the server of a notice the option to serve in accordance with the terms of the lease or in accordance with the terms of section 23 of the 1987 Act.  Unreasonable delay Gabb alleged that Farrokhzad had acted in a manner that was calculated to cause unreasonable delay and frustrate the sale of the flat. When faced with the second request for consent Farrokhzad had commenced forfeiture proceedings. The High Court observed that it was a “minor mystery” what those proceedings could achieve. Farrokhzad knew that his predecessor-in-title had waived the breaches, which were minor in any event. Farrokhzad appealed the FTT’s determination, resulting in the prospective buyer withdrawing from the sale. In relation to the third request for consent to assign, Farrokhzad had delayed giving permission by instructing agents to manage the process on his behalf. Further, after a six-week delay he instructed a surveyor to provide a list of major works in relation to the building. Lastly, although Farrokhzad knew the prospective third purchaser was a multi-billionaire from the Oppenheimer family, he still instructed solicitors acting for him to request he produce financial references. Relying on the test for unreasonable refusal of consent in Ashworth Frazer Ltd v Gloucester City Council [2002] 1 EGLR 15 and Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47; [2019] EGLR 52, Judge Gleeson emphasised that a residential lease was a valuable and tradeable capital asset. It was an interest that far exceeded, in value and importance, the very limited reversion of the landlord. Accordingly, a landlord was required to assess whether the benefit to him and the detriment to the tenant of withholding consent would be so disproportionate as to make the refusal of consent unreasonable. In the present case, Farrokhzad had acted unreasonably.  The carrot and the stick The High Court made a declaration that Gabb could assign the lease without obtaining landlord’s consent. He was also awarded damages for the losses flowing from landlord’s unreasonable behaviour. Farrokhzad has appealed to the Court of Appeal. Elizabeth Dwomoh is a barrister at Lamb Chambers Image © Scott Graham/unsplash