In Rotrust Nominees Ltd v Hautford Ltd  EWCA Civ 765, the Court of Appeal considered whether a landlord was unreasonable in refusing consent for the tenant to apply for planning permission for a change of use.
Many leases contain a provision prohibiting the tenant from applying for planning permission without the landlord’s consent. Where a change of use requires planning permission, the tenant would need to request consent from the landlord before applying for the planning permission.
In this case, the Property was a terraced building comprising a basement, ground floor and four upper floors. The basement and ground floor were used for retail. The first and second floors had been used for offices or for purposes ancillary to the retail use. The third and fourth floors were residential. The lease permitted residential use of the whole or part of the Property.
In accordance with the lease, the tenant requested consent from the landlord to apply for planning permission to change the use of the first and second floors to residential. The landlord refused consent, primarily because the additional residential use would increase the prospects of the tenant making a successful claim for enfranchisement under the Leasehold Reform Act 1967 (LRA 1967) which in turn would be detrimental to the Landlord’s management of the estate.
The County Court found that:
- The landlord had unreasonably withheld consent. By refusing consent, the landlord was attempting to achieve a collateral purpose of imposing a restriction on use that was not included in the User clause within the Lease.
- The landlord’s management interests in the Estate could have been preserved by including restrictive covenants under section 10(4) of the LRA 1967 in the transfer of the freehold if enfranchisement occurred.
The landlord subsequently appealed the County Court’s decision and the case was then heard in the Court of Appeal.
The Court of Appeal found that the landlord was unreasonable to refuse consent. The purpose of the tenant’s covenant to obtain consent was to protect the landlord against planning enforcement action. The purpose of the clause did not include restricting the residential use of the first and second floors to prevent enfranchisement of the Property pursuant to the LRA 1967.
This decision is interesting as it is the first reported case where the court has considered the reasonableness of a landlord refusing consent to apply for planning permission. The decision makes it clear that feared enfranchisement will not necessarily be a reasonable ground for refusing consent, although each case will depend on its specific facts.
For any Commercial Property advice contact our Specialist Team on 0800 088 6004.