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Starting as you mean to go on…pre-emption rights and applications to assign

TCG Pubs Limited and another v The Art or Mystery of the Girdlers of London [2017] EWHC 722 (Ch). Jennifer Johnson, is an associate at Fladgate LLP,­­ comments

This case involved a dispute between the tenant (in administration) (TCG) and the defendant (Girdlers) in relation to the proposed assignment of a lease of pub premises in London. The lease contained a provision prohibiting assignment without the consent of the landlord, such consent not to be unreasonably withheld, but prior to seeking consent the tenant was obliged to grant an option to the landlord at its market price.

The tenant went into administration and its administrators entered into a business purchase agreement with a purchaser. The tenant claimed to have made the offer to take back the lease and that the landlord failed to accept it. The tenant also claimed that it sought consent to assign. The landlord disputed that such an appropriate offer was made and also whether the tenant (as opposed to the assignee) had made a valid application for consent. There was also a dispute as to whether the landlord was unreasonably withholding consent in insisting upon a rent deposit or guarantee.

The judge’s comments serve as a useful reminder of the perils of not complying with the exact terms of the lease and incorrectly making an application to assign.

Obligation to grant an option
Unusually, the lease provided that if the tenant wished to assign or sublet the pub, it must first grant an option to the landlord. The landlord then had 60 days in which to exercise the option and buy-back the residue of the lease term at the current open market rent.
The tenant’s lawyers had written to the landlord offering them the opportunity to buy the lease for the sum of £1.7m in accordance with the business purchase agreement. 

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