The focus of this week’s Legal Update looks at a recent decision of the High Court that considered certain circumstances in which it was reasonable for a Landlord to refuse consent to a request made by its Tenant to make alterations to its premises.

The decision will prove helpful as guide to the thought process involved in dealing with requests for consent to alterations under both residential and commercial leases.

The background

In Messenex Property Investments Limited -v- Lanark Square Limited, Messenex was the Tenant of a lease of a former mixed-use building (“the Premises”) and it wanted to build additional storeys on top of its existing demise of the Premises (“the Works”).

Under the lease of the Premises, Messenex covenanted with the Landlord, Lanark Square, in respect of alterations (“the Alterations Covenant”) as follows:

“That no additional or new building or structure of any kind shall at any time hereafter be erected upon the Demised Premises or any part thereof without the prior consent in writing of the Lessor which shall not be unreasonably withheld or delayed; and

Not at any time during the Term to make or permit or suffer to be made any alterations or addition to the main structure or any alterations in the external appearance or layout of the Demised Premises or any part thereof without in any of the foregoing cases the prior written consent of the Lessor (such consent not to be unreasonably withheld or delayed)”

Messenex’s application for consent was refused by Lanark Square. Accordingly, Messenex sought a declaration from the Court that Lanark Square had unreasonably withheld consent and in doing so, Messenex was discharged from the Alterations Covenant requiring them to seek approval.

The law

The Alterations Covenant is what is otherwise known as a “qualified covenant” and is one which requires a Landlord not to unreasonably withhold its consent to the act that the Tenant wishes to undertake. The requirement of the Landlord not to unreasonably withhold its consent can either be an express term of the lease, such as the Alterations Covenant in this case, but it may also be implied under Section 19(2) of the Landlord and Tenant Act 1927.  This provisions states:

“In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against the making of improvements without a licence or consent, such covenant condition or agreement shall be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that such licence or consent is not to be unreasonably withheld; but this proviso does not preclude the right to require as a condition of such licence or consent the payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the landlord, and of any legal or other expenses properly incurred in connection with such licence or consent nor, in the case of an improvement which does not add to the letting value of the holding, nor does it preclude the right to require as a condition of such licence or consent, where such a requirement would be reasonable, an undertaking on the part of the tenant to reinstate the premises in the condition in which they were before the improvement was executed”

Certain covenants to alterations will require the Tenant making seeking consent for the same to provide the Landlord with detailed plans and specifications as part of the request albeit in practice, it is essential that as much information as possible should be presented to the Landlord that enables a suitable full understanding as to what is being proposed and that a reasonable amount of time is provided for consideration of the same.

The Decision

The Court had to consider three distinct questions:

1. The scope of Messenex’s application for consent;

2. Lanark Square’s reasons for refusing the request for consent; and

3. Whether those reasons for refusing consent were to be considered as reasonable.

The claim failed. In dismissing Messenex’s application for declaratory relief, the Court held that:

1. Lanark Square had requested as part of the application for consent, that Messenex provided them with engineers’ drawings so as to enable them to assess the impact of the proposed alterations. Messenex failed to provide the drawings; and   

2. Messenex had refused to give an undertaking to pay Lanark Square’s reasonable costs incurred by them as part of the consent process.

Both of the above were held by the Court to be reasonable requests and thus, in default of compliance by Messenex, good reasons for Lanark Square to withhold consent.  

Certainly, Messenex’s refusal to agree to provide an undertaking in respect of Lanark Square’s costs went against a long-standing principle that such refusal to pay a Landlord’s reasonable costs incurred in order to consider an application is on its own good reason to refuse an application for consent. 

However, it should be noted here that Lanark Square did not succeed on all of their reasons to refuse consent. Part of the Works would have involved a trespass upon Lanark Square’s retained land but it was held that was not a legitimate reason for withholding consent as there had been a prior agreement between the parties before to the proceedings being issued that Messenex could have access to the retained land.

Further, Lanark Square required that payment was made by Messenex of any outstanding service charges as forming part of the granting of consent. This was not a good reason as it was considered this was a separate dispute and did not form part of the terms of consent on the facts of this particular case.  This point is likely most pertinent to those of you managing residential property.

Conclusion

This decision will be a welcome one for Landlords and those involved in the consideration and granting of consent for alterations, albeit it needs to be firmly remembered that each case such as this turns on its own facts. In other circumstances, it may have been good reason for Lanark Square to refuse consent based upon the trespass on their retained land and the requirement for service charge arrears to be discharged as part of the application. 

Whilst there is usually no formal process that the parties must follow when requests for consent to alterations are made, unless otherwise expressly set out in the lease, it remains good practice that a Tenant should present the Landlord with as much information as possible to consider any application such as professional drawings and specifications. Where those are not provided by the Tenant in advance, it is likely reasonable for the Landlord to request that such information is given and in many cases withhold consent until certain relevant information is forthcoming.

Further, the decision reinforces the position that a Landlord may refuse consent to an application where there is a refusal by a Tenant to undertake to pay their reasonable costs, such as legal and surveyors’ fees incurred by them as part of considering the application.

Comment

The licence process is full of dangerous potholes and trip hazards for agents, Landlords, RTM Companies and RMCs (see here, here, here, here and here) and thus it is good advice that a licence, for alterations or any other thing for which licence is required under the lease, should only be granted following competent legal and possibly surveyors advice.  The fees for such are often payable by the requesting tenant in advance and so the client should take advantage of that position to ensure that it is properly advised throughout the process.

For more information, please feel free to contact a member of the team on 01435 897297 or info@kdllaw.com. 

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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