Posted: 25/05/2022
Mainstream press coverage of Harry Rollo Gabb v Meghdad Farrokhzad [2022] EWHC 212 (Ch), unsurprisingly, focused on the parties’ wealthy lifestyles and the apparent trivialities of whether certain curtains and floor coverings were suitable for a ‘high class private residence’, and were therefore in breach of the lease. However, in reality, the facts of the case highlight the importance of landlords acting reasonably and in a timely manner when receiving a request to assign a lease and may have important implications for housing associations.
The key issue of the case was the withholding of the landlord’s consent in respect of an assignment. It is common for both residential and commercial leases to require written consent from the landlord before the lease can be assigned. The main defence brought forward by the defendant’s counsel was the issue of how the notice of assignment was communicated. What is clear from the decision is that a landlord cannot act unreasonably and unduly withhold consent.
The claimant held a long lease of the property and had been a long-term tenant. The current landlord was the predecessor of the original grantor of the lease. The court noted that many of the issues raised in this case originated from the tenant objecting to the landlord’s application for a late-night and all-week alcohol licence.
Following the objection, the landlord claimed several alleged breaches of the lease, including the fact that wooden shutters were installed as opposed to curtains, and threatened the tenant with major refurbishment of the property. The issue was brought to the First-tier Tribunal Property Chamber to seek forfeiture of the lease. The tribunal found that the landlord was aware of the breaches, which were also minor and easily remedied. There was no reasonable possibility for forfeiture.
Prior to the tribunal, the tenant had agreed a sale of the property and a further sale was agreed, while the proceedings were on going. Under the terms of the lease the tenant could not assign the lease without ‘the prior written consent of the Landlord (which consent shall not be unreasonably withheld)’.
The initial application for consent was requested from the landlord on the 15 October 2020 and as of January 2022 the consent had not been granted. As is common with the sale of leasehold properties, an LPE1 form was requested. An LPE1 collects relevant information held by landlords or managing agents, and their requirements for an assignment.
During the proceedings, the landlord advised that any communications sent would be ignored apart from those in relation to the tribunal. The tenant’s solicitor repeated the request for the relevant information after the conclusion of the tribunal. Receiving no reply, the tenant brought a claim against the landlord for unreasonably withholding the consent. The buyer withdrew citing ‘ongoing delays and problems with the landlord’.
Following this withdrawal, a third sale was agreed at a reduced price. The landlord’s requirements were again requested, and the tenant was advised that the property was now being managed by a managing agent. It was brought to the attention of the court that the landlord had specifically requested that the agents delay the transaction. In the meantime, the tenant noted some repair work, and this was brought to the attention of the managing agent at the time. An LPE1 was provided, stating no major works were required within the next two years. Despite the replies provided, the managing agent was instructed to appoint a surveyor, causing further delays to the transaction.
The tenant’s case stated that due to the unreasonable conduct of the landlord he was entitled to both a declaration that he may assign the lease without consent and to damages under the Landlord and Tenant Act 1988. He also sought an injunction in respect of the landlord’s future conduct and exemplary damages.
The main arguments brought forward by the defendant were that the various requests for consent were not valid. An application should be in writing and specify the details of the assignment. The application should be served on the landlord by the tenant in accordance with the terms of the lease. If the lease is silent, as it is in this case, then it does not need to take a particular form or be served in a particular manner. It is effective if it comes to the attention of the landlord. The court found that the method of notice was sufficient for these reasons.
Following the notice, the landlord must then be given reasonable time to consider the details of the request. If a landlord does not respond in a reasonable time, then there is a breach of their statutory duty. What is emphasised in this case is that the definition of reasonable is dependent on context; given that the terms of the lease in this example were relatively simple, with no traditional service charge provisions and the rent being a peppercorn, the delay was not deemed reasonable.
Landlords can refuse the application. However, they cannot refuse if this is based on grounds which are not relevant to the landlord/tenant relationship, and it is for the landlord to show that his conduct was reasonable.
The court concluded that the landlord significantly delayed the sales and caused the tenant’s buyers to withdraw, and consequently decided that the tenant could assign the lease without consent and the landlord was liable to pay the difference between the sale prices. What is key for a landlord to consider is what can be deemed a reasonable time to review the details of the request and whether the notice is valid. If the landlord has a large portfolio of properties with leases on a similar term, for example a housing association, and they deal with assignments on a regular basis, can a delay be deemed reasonable in this instance?
Additionally, while this case focuses on the tribulations of wealthy individuals, it is important for housing providers to consider any repercussions a delay may have on leaseholders who are not so financially stable. Landlords will need to ensure any requests for assignment are dealt with in a timely manner, especially as housing associations are coming under greater scrutiny when it comes to tenant care and satisfaction.
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