Can you say no to your tenant? Yes, if you're reasonable

This was the point argued (unsuccessfully by the landlord) in Landlord Protect v Anselm Development. The landlord imposed the condition that a director of the tenant company (a new company with no trading record) provide extra security as personal guarantor for the rent and lease obligations. The tenant argued it was unreasonable to keep the director liable after the lease assignment, only being released when replaced as guarantor.

Since a tenant is only liable for the tenancy period, such a condition had the potential to leave the director liable after his company was not. As such it enhanced the landlord's rights. The Court held this was unreasonable. The judge remarked that a landlord can refuse consent if a tenant is not considered able to meets its liabilities and won't give extra security. The landlord should not need further protection.

There is better news for Landlords in Royal Bank of Scotland v Victoria Street.

Here the Lease contained a tenant's covenant only to assign to "a respectable and responsible" assignee!

The tenant (another new company with no track record) was not considered respectable and responsible because of its recent incorporation. Three months rent deposit (but no guarantee) was insufficient to persuade the landlord otherwise. The Landlord refused consent. The tenant, believing the landlord was unreasonable, applied to the Court. The Court decided the landlord was not unreasonable. It is worth noting that the original tenant remained bound by the lease covenants even though no longer in occupation - the lease was a pre 1995 Landlord & Tenant Act lease. However that did not impact the Court's decision. It would seem that each tenant or assignment/subletting is looked at in isolation and one tenant cannot rely on the respectability or responsibility of another. This is good news for landlords who have justifiable concerns over tenant covenant strength and maintaining their income generally. Perhaps not so good for a tenant looking for a base, or desperate to assign to save themselves from growing financial hardship. So what can a tenant do if the landlord refuses consent? Before rushing to court remember a tenant can make a further application with further information and/ or offers of collateral security to make themselves more attractive to the landlord. If that proves unsuccessful perhaps it is time to find a landlord more in need of a tenant, as Court is a last resort.

Reproduced from PG Lore magazine with the kind permission of Pemberton Greenish LLP.