You will recall that a lessor cannot unreasonably withhold or delay consent to an assignment, sublease or change of use if there is a covenant in the lease requiring the lessee to first obtain the lessor’s consent. A lessor who unreasonably withholds consent or delays can be held responsible for damages.
We have lived with these requirements for a few years. So what is the current position for parties to leases where consent to an assignment, subletting or change of use is sought?
A lessor can prohibit a lessee from assigning, subleasing or changing the use. A lessor can also prescribe pre-conditions to consent, but these must be reasonable.
Examples of unreasonably withholding consent include:
• the lessor wants the premises themselves or for some other proposed lessee
• the assignee would vacate other premises leased from the lessor
• the lessor imposes conditions requiring the lessee to perform other covenants before assignment will be permitted
• the lessor demands execution of a deed of covenant (when the lease does not require this)
• the lessor requires payment of any amount (other than reasonable fees for legal costs and the lessor)
• the lessee is bankrupt or is in receivership or liquidation
Conditions concerning consent to assign must relate to the character or personality of the proposed lessee or matters that affect the use or occupation of the premises. These might include:
• the assignee’s solvency or perceived ability to pay the rent
• unsatisfactory references
• the proposed use is illegal or immoral
• the lessor is likely to lose goodwill or suffer a loss in value of the premises or the rental
The lessor will be judged by an objective standard and need only consider it’s own interests. The lessee is the one who would need to prove the lessor is being unreasonable.
By Denise Marsden