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Consent to Assign – Taking The Good With The Bad

Katherine Campbell, Counsel and Head of Real Estate Disputes at Reed Smith LLP, comments

February 2018 saw the Court of Appeal apply a common-sense approach to the often-subjective area of ‘consent to assign’ between a landlord and tenant. The original 2016 ruling, in the case of No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd, flummoxed much of the legal and real estate world as it asserted that one bad reason for refusing consent to assign a lease effectively trumped two other, good reasons.

The respondent in the original case was the tenant - East Tower Apartments, a company registered in the British Virgin Islands.
The company held long underleases, for terms of 999 years from 2004, of 42 residential apartments in a 33-storey building in east London. Managed on the landlord’s behalf and let on short-term assured short-hold tenancies, each apartment was subject to an underlease containing a covenant not to assign or underlet the premises without prior written consent. Such consent could not be unreasonably withheld. The underlease contained other covenants which included the need to pay all the landlord’s proper costs, charges and expenses, including legal costs and surveyors’ fees, incurred as a result of an application for consent or approval, whether or not this was granted.

Problems arose when the tenant decided to sell the apartments. Having successfully obtained from the landlord consent to assign an initial eight leases with the only caveats imposed being an administrative fee of £1250 + VAT and payment of any due service charges for each consent things appeared to be moving smoothly. However, after having the initial eight consents to assign granted, the next three proved to be more problematic as the landlord sought to impose three additional conditions:

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