The Supreme Court in a majority 3 to 2 decision recently handed commercial landlords a fillip in the case of Sequent Nominees Limited v Hautford Limited. By the smallest of margins, the Supreme Court found for the landlord, who had previously lost at the County Court, High Court and Court of Appeal.
The Defendant tenant held a long lease of a building in Soho and wanted to make an application for planning permission to change the use of the first and second floors to residential use. This would have meant that the majority of the building would have had a residential usage.
The Claimant landlord refused to consent to the proposed planning permission application because they were concerned that this would pave the way for the tenant to eventually seek to acquire the freehold of the building under the enfranchisement provisions of the Leasehold Reform Act 1967. The refusal of the consent was reasonable, in the landlord’s view, as they were just protecting their own property interests. Yet the user clause in the lease specifically allowed the building to be used for residential purposes so there was a conflict between the terms of the user covenant and the clause dealing with planning permission in the lease.
Giving the leading judgment, Lord Briggs decided that there were economic consequences to the landlord in giving or refusing consent and so the refusal of consent here was reasonable. This decision goes a long way to clear up the issue as to whether a landlord can withhold consent to alter, assign and change use under a lease because of the perceived risk of future enfranchisement.
Ross Paterson, Solicitor – 20th November 2019