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Alterations

Unreasonable refusal to consent

Iqbal v Thakrar
[2004] EWCA Civ 592; [2004] 36 EG 122.

Facts

Lease of ground floor premises for a term of 999 years, which contained a covenant not to alter the premises without the consent of L not to be unreasonably withheld. T sought Ls consent to carry out alterations to convert them into a restaurant. L had plans to convert the upper floors into residential flats and refused consent on various grounds. In particular L was concerned that the alterations would cause structural damage to the rest of the building.

Held

Consent had not been unreasonably withheld. L was entitled to refuse where it had genuine concerns about the structural viability of the proposals. In coming to its conclusion the CA applied the principles laid down by Balcombe LJ in International Drilling Fluids Limited v Louisville Investments (Uxbridge) Limited [1986] Ch 513 (i.e. the factors to be considered when deciding whether or not consent to an assignment has been unreasonably withheld).


Unreasonable refusal to consent

Conditions

Sargeant v Macepark (Whittlebury) Ltd
[2004] EWHC 1333 (Ch)

Facts

L wanted to insert a condition in the consent to carry out the alterations (the building of an extension) which sought to prevent T from using any of the rooms in the extension otherwise than for functions and activities which are directly related or connected to management training conferences held at the premises. L wanted to protect itself against perceived competition to their wedding and functions business. However, the user covenant permitted T to use the premises for other conferences, which were part of its existing business.

Held

The proposed condition was therefore too narrowly drawn and was unreasonable. Iqbal (above) applied. Lewison J:
    "41. The principles that Balcombe L.J. distilled in International Drilling Fluids were adapted by Peter Gibson L.J. (with whom Longmore L.J. agreed) for the purposes of a covenant against alterations in Iqbal v. Thakrar [2004] EWCA Civ. 592 as follows:

      "(1) The purpose of the [covenant] is to protect the landlord from the tenant effecting alterations and additions which damage the property interests of the landlord.
      (2) A landlord is not entitled to refuse consent on grounds which have nothing to do with his property interests.
      (3) It is for the tenant to show that the landlord has unreasonably withheld his consent to the proposals which the tenant has put forward. Implicit in that is the necessity for the tenant to make sufficiently clear what his proposals are, so that the landlord knows whether he should refuse or give consent to the alterations or additions.
      (4) It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable landlord in the particular circumstances.
      (5) It may be reasonable for the landlord to refuse consent to an alteration or addition to be made, for the purpose of converting the premises to a proposed use even if not forbidden by the lease. But whether such refusal is reasonable or unreasonable depends on all the circumstances. For example, it may be unreasonable if the proposed use was a permitted use and the intention of the tenant in acquiring the premises to use them for that purpose was known to the freeholder when the freeholder acquired the freehold.
      (6) While a landlord need usually only consider his own interests, there may be cases where it would be disproportionate for a landlord to refuse consent having regard to the effects on himself and on the tenant respectively.
      (7) Consent cannot be refused on grounds of pecuniary loss alone. The proper course for the landlord to adopt in such circumstances is to ask for a compensatory payment.
      (8) In each case it is a question of fact depending on all the circumstances whether the landlord, having regard to the actual reasons which impelled him to refuse consent, acted unreasonably."
    42. I have placed the word "covenant" in square brackets, because the text of the transcript reads "consent"; but that seems to me to be a misprint. Proposition (7) is a new one. It does not feature among the principles enunciated by Balcombe L.J. in International Drilling Fluids. Although Peter Gibson L.J. does not expressly say so, it echoes the effect of section 19 (2) of the Landlord and Tenant Act 1927."



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