Commercial Property Leases – Landlord’s Consent to the Assignment of Lease
The provisions of sections 224 to 229 of the Property Law Act 2007 are relevant when addressing the issue of Landlord’s consent to the assignment of a Lease.
Whether or not consent is unreasonably held is a subjective question and the actual reason for the refusal must be assessed in light of the information available to the landlord at the time consent was refused.
- The assignor has the onus of proving that the landlord’s consent is be unreasonably withheld
- In order for consent to be withheld unreasonably it must be withheld arbitrarily without reasonable cause.
- It is reasonable to refuse consent on the basis of a doubt based on reasonable grounds that the assignee will be unable or unwilling to perform its obligations under the contract.
- The refusal to consent to an assignment to a credit worthy tenant carrying on a lawful and permitted business use can be reasonable only if that refusal is made for reasons relevant to the landlord tenant relationship, such as the tenancy mix in the shopping centre.
It is unlikely the Landlord can take into account the following factors when refusing to grant consent:
- Requiring the tenant to perform other covenants (other than contractual terms) before assignment is permitted. – The requirement for the assignee to enter into a bank guarantee or a bond will in many cases constitute unreasonable consent where the lease does not previously require this.
- Where the landlord wants the premises for themselves or for some other proposed tenant.
- Where the tenant is bankrupt or in receivership or liquidation
- Payment of consideration other than payment of reasonable fees for legal costs and other costs properly incurred in considering the request for assignment; and
- Requiring the tenant to vacate other premises leased by it from the landlord
The matters must affect the use or occupation of the premises or relate to the character or personality of the proposed assignee, such as:
- The landlord is likely to suffer a loss in the value of the premises or the rental or lose goodwill with other tenants occupying the building;
- Unsatisfactory references that the assignee provides;
- The assignees proposed use of the premises is either illegal or immoral.