Many leases require that a leaseholder, before doing certain things such as sub-letting, altering, assigning the flat or having a pet, must first seek and obtain consent (licence) from their Landlord (“LL”), Management Company (“RMC”) or RTM Company (“RTM”). To proceed otherwise will amount to a breach of the lease terms and leave the leaseholder open to action for that breach.  

Many LLs, RMCs, RTMs and professional managing agents will have in place prescribed procedures or policies to deal with any requests for licence from a leaseholder. Whether you have such a set formula or not, the following will be of use to you because the process of considering and granting licences is fraught with potential pitfalls (so, think, “expensive”). 

The following are just some of the considerations necessary upon the receipt of a request for any form of licence under a residential lease. It is not an exhaustive list, however, and so ultimately you are always directed to the “Golden Rule” below in any circumstances.

Can and should you grant the licence requested?

This breaks down into two parts as follows:-

1. Are you the right party to grant consent?  

   This often overlooked question can, if not considered properly, give rise to significant issues for both the requesting leaseholder and the granting party.

   Under a lease it is common that the licence requested will be capable of grant by LL. Sometimes that consent can be granted by either or both of the LL or RMC in a tri-party lease.   It is important though to consider who you are/who your client is in that context and ensure that that party has authority under the lease to grant the consent requested.  If in doubt, consult the lawyers before acting.

   The Commonhold and Leasehold Reform Act 2002 introduced the right to manage and, since then, many leaseholder groups in developments have exercised the right to manage their developments in place of the LL or RMC.  That right to manage includes the passing of the right to grant licences to the RTM.  So if your block is run by a RTM then it is only the RTM that can grant the required licence - not the LL or RMC as may apply. There is a strict procedure to follow for such consents which we set out in our Legal Update here - Can a RTM Company grant consent under a lease? – KDL Law

2. Should you grant consent?

   The question of “should” you grant the licence requested may often be considered a personal decision but, whilst that is correct, the question also requires significant legal consideration too.  In May 2020 the Case of Duval v 11-13 Randolph Crescent Limited came before the Supreme Court and sounded a significant change in the approach to the granting of licences - we reported on the case and its effects in our Legal Updates here - To consent or not to consent, that is the question … (Part Two) – KDL Law and here - The ‘Duval’ issue and possible solutions – KDL Law.

   In brief Duval says that where a lease contains three specific provisions then it may be the case that, whether or not the LL/RMC/RTM wants or is happy to grant the licence requested, it may not be lawfully able to do so.

For the above reasons, no licence should be granted by any LL/RMC/RTM in the absence of prior clear legal advice on the first hurdle of actually “can” and “should” consent be granted.

Fixed policies on granting certain licences - the “No Pets Policy”

Assuming that the requested licence can be considered and that you/your client is the relevant party to grant the consent, the next question is whether you/your client actually wants to grant the consent requested.  Here lies another and very common pitfall. 

Many developments may, irrespective of the lease provisions, predetermine the answer to such requests. A common example of this is the “No Pets Policy” (although the same issues relate to bans on alterations, assignment, sublet etc as much as it does to pets).

Any fixed and immovable policy is going to be subject to challenge and could well be unenforceable where there appears to be no exceptions to it and it is, in effect, a blanket policy.  An element of discretion or flexibility is needed, even if the decision is ultimately (or always) a refusal of certain types of request.  Such a policy is therefore unwise or at least needs to include the ability to exercise an element of discretion such that, despite the policy, consent could be granted in the future in relevant exceptional cases.

Have a list of criteria by all means but ensure that any fixed requirements are subject to exceptions or bending and that full consideration is given to lifting or bending those requirements, even if the answer is still ‘no’. 

“No” may still be an entirely fair and proper response to a licence request, notwithstanding the above, as was the case with poor Vinnie the Yorkshire/Maltese terrier as explained in our Legal Update - Dealing with applications for consent – KDL Law, but note carefully the approach adopted in this case about a “No Pets Policy”.

The unfortunate correspondence error - the “In Principle” rule 

This is a cautionary note.  It arises from a 1996 Court of Appeal case of Mount Eden Land Ltd v Prudential Assurance Co Ltd and a 1989 case of Venetian Glass Gallery v Next Properties Limited, and relates to the wording used in correspondence ahead of the grant of formal licence.  In short, the wording of a pre-grant letter can inadvertently give rise to the grant of the licence prior to the completion of formalities.

Commonly in a negotiations for, say, a contract for sale where the parties have no pre-existing legal relationship the parties will head letters as “subject to contract” or a similar type of wording.  That safety phrase works adequately to suspend the conclusion of negotiations until the contract sought has been signed by the two negotiating sides - a bi-lateral arrangement.  In the Mount Eden case the parties, a LL and its tenant, had a pre-existing legal relationship by virtue of the lease. The LL had used a similar phrase, here “subject to licence”, in its correspondence setting out to the tenant conditions that would need to be complied with prior to the unilateral act of the grant of the requested licence.  The letter, headed as stated above, explained that “I can confirm that the freeholder gives consent for the works subject to the following conditions …”.

The tenant claimed that the letter itself amounted to the grant of the requested licence.  The Court of Appeal agreed with the tenant that licence had indeed been granted by the letter and thus prior to the conclusion of the formal licence document itself.  The safety phrase “subject to licence” included had no real effect, and certainly not that intended by the writer, the landlord’s agent.

Accordingly, the language to be used in any pre-grant correspondence is terribly important and must be clear that it does not constitute the grant of the licence under discussion. 

As with the above points the advice has to be, if in doubt, ensure that you/your client consults with the lawyers before corresponding with the requesting party.

The specific terms of any licence

Without doubt this is a question for your/your client’s professional advisers, be they surveyors, lawyers or other necessary and reasonably involved advisers.  Accordingly, and perhaps unsurprisingly in light of the running theme above, any LL/RMC/RTM should appoint their lawyer both at an early stage such that the pitfalls above are avoided but, certainly, at the point of getting into the detail and effect of the grant of the licence requested.

The lawyers used should be experienced in such matters, will have tried and tested draft forms of licence for specific sets of requests and will be attuned to thinking around the issues arising out of the specific request and whether, for instance, part of the condition for the grant of licence may need to involve other things, such as a Deed of Variation to the lease or some other arrangement to best protect both the LL/RMC/RTM and, importantly, the other leaseholders and occupiers of the development.

Costs - who pays?

In all of the above you may have noted the theme of “consult the lawyers”.  But, you say, lawyers do rather like to charge for their time and so who is going to pay for all of this?  It is a great and wholly appropriate question to which the answer is almost always - not the LL/RMC/RTM but the requesting tenant, often in full and in advance.

Most leases will either provide for costs to be paid by the requesting leaseholder in dealing with any grant of licence but, irrespective of that, it is reasonable in most circumstances that any licence be granted conditional upon a term that the requesting leaseholder cover all reasonable costs in that process, be that legal or other reasonably incurred professional fees.

Any discussion about a licence therefore should properly start with confirmation that prior to you/your client considering whether or not licence can or will be granted agreement to, and payment on account of, costs to be incurred in that consideration will need to be received from the requesting tenant.  At that point you/your client should consult with your/your client’s lawyers and obtain estimates as to the likely costs involved in taking the discussion further.  That sum should then be paid in advance by the leaseholder and the work toward considering licence can begin.  An undertaking from the tenant’s solicitors to pay costs is acceptable but payment on account is always the better option as it saves on a potential debate later, particularly where licence is not granted.

The Golden Rule

With all matters of complexity the golden rule to follow is, unless you are absolutely clear that the direction that you are to travel is 100% correct, then speak to the lawyer (or other relevant professional adviser) before taking that first step.  Even if you were right all along, those advising you will confirm so and direct you as to how best to do what you seek to do.  If you weren’t completely correct though that, likely brief, interaction with the relevant expert will save you from a potential painful and expensive error. 

Given that, in the case of granting licences, the lawyers’ fees are almost always paid by the requesting leaseholder and not the LL/RMC/RTM it is really a “no brainer” to seek and obtain advice before acting.

Disclaimer

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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