Requests to assign a lease – when is a landlord unreasonable? Gabb v Farrokhzad [2022]

The lease contained the fairly standard provision the tenant was "not to agree to assign or to assign … the demised premises unless [he] shall first obtain … the prior written consent of the Landlord (which consent shall not be unreasonably withheld)", generally referred to as a "fully qualified" covenant. The Landlord & Tenant Act 1988 (1988 Act) imposes certain duties on a landlord in relation to such covenants, including an obligation to give consent (except where it is reasonable not to do so) and an obligation to consider and respond to requests within a reasonable time.

Mr Gabb made various attempts to sell his property by assigning the lease which, he argued, fell through/might fall through as a result of the alleged unreasonable conduct of Mr Farrokhzad in delaying and refusing to consent to the assignment(s). Mr Gabb argued that, as a result of the unreasonable conduct, he was entitled to a declaration he could assign his lease without consent, and to damages to compensate him for losses suffered. He also asked the Court to grant an injunction in respect of Mr Farrokhzad's possible future conduct and 'exemplary' damages.

Mr Farrokhzad's position was that his actions had not been unreasonable and even if they had been unreasonable, there were formal defects in the communications from Mr Gabb in respect of his requests for consent, which he argued invalidated those requests.

The judgment details the various attempts by Mr Farrokhzad to "string the process of giving consent out for as long as possible" which included his unjustified claims of breach of covenant, threats to forfeit the lease and unnecessary requests for financial references (in circumstances where the proposed assignee was a known billionaire, had already provided a reference, and the rent would be 'a peppercorn').

The claim was allowed in part. The Court found that Mr Farrokhzad had "embarked on an extended campaign of delay" and the declaration sought by Mr Gabb was granted and damages awarded to him which included abortive sale costs, council tax and interest on mortgage payments which would otherwise have been avoided had the sale completed.

A few interesting points were raised, as follows:

1. Effect of finding of unreasonable refusal: A tenant had a right at common law to assign his lease without consent if the landlord unreasonably refused consent, together with the right under section 4 of the 1988 Act to sue the landlord for damages.
2. "Written and served": Under the 1988 Act, in order to trigger liability on the landlord, a request for consent had to be both written and served. The Court confirmed that a request contained in an email satisfied the requirement for it to be 'written'. Mr Farrokhzad argued the consent request had not been properly served but the court rejected this. Mr Gabb's communications satisfied the requirements of the relevant legislation as they were valid under the terms of the lease, had been received and were understood to be requests.
3. What is a 'reasonable time' to respond to the request?: What is reasonable will depended on the circumstances of the particular case, including those known to the landlord and tenant at the time of the application, and subsequent events. In this case, what was reasonable was viewed in light of circumstances where Mr Farrokhzad had in fact been aware of the application for a period of about 3 months whilst Tribunal action was ongoing. As such the time by which he ought to have responded following the conclusion of that action was adjusted accordingly.
4. Requirements of the lease: Mr Farrokhzad argued the relevant clause required Mr Gabb "not to agree to assign" unless consent was first obtained. He argued the words underlined made clear the tenant was required to obtain written consent before agreeing to assign the lease and the very first communication from Mr Gabb's solicitors confirmed an offer had already been accepted. Mr Farrokhzad therefore argued Mr Gabb had not complied with the requirements of the lease. However, the Judge rejected this and said that mere successful negotiation is not an "agreement to assign" in this sense.
5. Damages under the 1988 Act: The Court did comment that Mr Gabb should have been entitled to the difference in sale value between the 'lost' sale and the 'new' sale in the sum of £50,000, but this did not form part of his claim.
6. Exemplary damages / Injunction: An award of exemplary damages was appropriate "where a landlord pursued a deliberately obstructive policy designed to prevent the tenant assigning their lease for their own gain, regardless of whether that policy succeeded". However, there was no evidence as to what Mr Farrokhzad's motivations for his conduct might have been, and it was not appropriate to award exemplary damages on "pure guesswork". The Judge refused to grant an injunction requiring Mr Farrokhzad to comply with his duties in respect of any future purchaser and said this was unnecessary given the form of declaration he intended to make (to allow the sale to proceed without consent).

This case provides a useful overview of how requests for consent to assign ought to be handled at each stage. However, it is important to remember that each case of this sort will turn upon its own facts.