Landlords and consent for alterations

When is it reasonable for a landlord to withhold consent for alterations? Louise Day analyses a recent ruling.

In the High Court decision Messenex Property Investments Ltd v Lanark Square Ltd [2024] EWHC 89, the Court considered a tenant's application for a declaration that its landlord had unreasonably withheld consent for alterations.

The background

Messenex Property Investments Ltd is tenant of a four-storey mixed-use building on the Isle of Dogs.

Its lease contains covenants preventing alterations or additions to the building without prior consent in writing from the landlord, not to be unreasonably withheld or delayed.

In 2020, the tenant made two formal requests to the landlord for consent to carry out some substantial, structural works. 

The landlord, Lanark Square Ltd, responded, setting out the further information they required in order to consider the applications for consent, including the provision of preliminary structural engineer's drawings.

There followed a lengthy chain of correspondence over the course of the next nearly three years, which culminated in the tenant issuing proceedings in March 2023.

In that period, engrossments of the licences for the works were circulated and agreements in principle reached to deal with the additional rights required by the tenant.

The grounds on which Lanark relied for withholding its consent were:

1. Messenex had failed to provide structural engineer's drawings;
2. The works involved trespass on property retained by Lanark;
3. Messenex failed to provide unconditional undertakings for Lanark's reasonable costs; and
4. Lack of clarity in Messenex's proposals.

The decision

The Court found in favour of the landlord and did not grant the declaration sought by the tenant.

In coming to its conclusion, the Court considered what the Landlord's reasons for withholding consent actually were, whether those reasons were reasonably held, and whether the Landlord was acting reasonably in relying on those reasons. The Court found grounds ii and iv to be unreasonable: by the time proceedings were issued, the terms on which Messenex could have access to Lanark's retained land had been agreed, and the works to which Lanark was being requested to give consent were sufficiently clear and known to the parties per the issued engrossment licences.

The Court did find Lanark's concern regarding the structural impact of the works and refusal to proceed without the requested drawings to be reasonable.

The Court also found that Messenex's attempt to provide an undertaking conditional on completion of the licences within 14 days (that being despite the still-outstanding structural drawings) was not a 'proper undertaking' and that "the refusal to provide an unconditional undertaking is potentially a good reason for withholding consent to the grant of the licences"

Conclusion

Whilst each case will of course turn on its facts, the decision provides confirmation and clarification on some general points which will be useful for both landlords and tenants to bear in mind:

1. In matters of consent for alterations, the burden is on the tenant to show the landlord is acting unreasonably in withholding consent;
2. The reasonableness of withholding consent for alterations should be judged by reference to the facts and circumstances existing at the time proceedings were commenced (rather than at the point formal request for consent was made);
3. On a related point, Section 19(2) of the Landlord and Tenant Act 1927 (which implies into a lease where landlord consent is required for alterations the proviso that the consent is not to be unreasonably withheld) does not require applications for consent to take any particular form nor require any particular formality: "the important point is that it must be clear to the landlord that a request for consent to particular works has been made and that a response is required";
4. It is not necessary for each and every ground relied upon by the landlord to be reasonable. If the landlord holds two reasonable grounds and two unreasonable grounds for withholding consent, the existence of those two unreasonable grounds will not necessarily prevent the Court finding the landlord has acted reasonably in relying on the other two;
5. It may be reasonable on the facts for a landlord to withhold consent for a reason that does not relate directly to the subject premises or to the proposed works directly. For example, where the landlord has a reasonable concern that the alteration requested, if carried out, would negatively impact upon adjacent property held by that same landlord;
6. It may also be reasonable, on the facts, for a landlord to withhold consent in the absence of an unconditional undertaking for its reasonable costs in dealing with a tenant's application for consent.
7. Requiring payment of outstanding charges otherwise unrelated to the rights sought, as a pre-condition of completion, may not be a reasonable grounds for withholding consent.

Louise Day is a solicitor in the property litigation team at DAC Beachcroft.