Terms of the Contract – Landlord’s Refusal to Consent
By David Burrough
This phrase does not impose an obligation on a landlord to consent to all transfers of a lease however it is intended to prevent the landlord from arbitrarily refusing consent.
It is the responsibility of the tenant to prove that the landlord’s refusal to consent is unreasonable. There are a variety of matters to be considered in deciding whether or not a landlord’s refusal to consent is justified. It is important to keep in mind that each case depends on its own set of circumstances.
Generally for the landlord’s refusal to consent to be reasonable, it should relate to the character and personality of the proposed assignee and/or to matters relating to the use and occupation of the premises. The cases in relation to this matter provide some guidance and indication of grounds which will usually justify the refusal of consent and grounds which will usually be inadequate reasons for refusal. The following are examples of grounds which will usually allow the landlord to refuse consent:
1. the character and personality of the assignee (for example due to unsatisfactory references);
2. the financial position of the assignee (for example the assignee being an undischarged bankrupt or the landlord having concerns regarding the assignees ability to abide by the terms of the lease);
3. the lack of a well documented application for consent (for example, which does not contain adequate financial information, references, and does not contain adequate information in relation to the position of any new guarantors).
The following are examples of what will usually be inadequate grounds for the refusal of consent:
1. the refusal was for a collateral purpose by the landlord or designed to obtain an advantage for the landlord (for example, if the landlord is seeking to impose an increase of rent on the assignee or obtain additional security from the assignee);
2. if the landlord was seeking to impose, as a condition of the consent, resolution of an outstanding argument between the landlord and the current tenant.
Again, it is important to keep in mind that the above situations are examples only and each case depends on its own set of circumstances.
The contract for the sale of the motel leasehold business should be subject to the consent of the landlord to the assignment of the lease. Generally, the contract will allow either party to terminate the contract where the consent is not obtained by the completion date. If this occurs, the purchaser will be entitled to have deposit monies paid refunded in full.
Where a tenant or a proposed assignee suspects that a landlord’s consent may be unreasonably withholding their consent, immediate legal advice should be sought to determine the best course of action. However, the best form of protection for a tenant is to ensure that the proposed assignee is able to present to the landlord clear and concise documentation, which provides information about their character and financial standing.
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