When a decision to assign a lease is made and terms are agreed the temptation to “get the deal done” can often take over. The recent case of E.ON UK plc v Gilesports Ltd  comes as a stark reminder to landlords and tenants alike of the need to ensure that formal consent of all parties to an assignment is obtained.
This case concerned a retail unit let by a superior landlord to a head tenant (for purposes of this article referred to as the “landlord”) (the “superior lease”). The retail unit was subsequently sublet to a sub-tenant (for purposes of this article referred to as the “tenant”) by reference to the terms of the superior lease (the “lease”). In turn the tenant shared occupation of the retail unit with a group company. When the group company was sold to a third party, it was agreed that the lease should also be formally assigned.
The tenant made an application to the superior landlord by email but failed to make an application to the landlord until some time later. When the landlord’s consent was applied for, the tenant again made the application by email but made no reference to the urgency of the application.
Despite some correspondence between the parties’ solicitors no licence to assign was agreed and completed but the lease was assigned. Correspondence did continue in respect of the licence after the assignment although it was not finalised or completed and the landlord was not informed of the assignment of the lease.
The assignee subsequently went into administration owing a significant amount of money to the landlord. On the basis that no formal consent had been given so the tenant remained liable the landlord sought to recover these from the tenant.
Amongst other points, the Court considered whether consent was required under the lease and, if so, had it been unreasonably withheld.
Whilst the lease did not contain a requirement on the landlord not to unreasonably withhold consent, statutory provisions provide that a landlord owes a duty to grant consent within a reasonable time, except in circumstances where it is not reasonable to do so. In order to trigger this duty notice must be served on a landlord by the tenant applying for consent.
In this case, the lease contained provisions requiring the delivery of notices in accordance with s196 of the Law of Property Act 1925 (ie physical delivery to the last known address of the landlord in the UK or delivery by registered post). The Court held that an application by email did not trigger the duty and, as such, the landlord was not under a statutory duty to give consent. The tenant therefore remained liable for the tenant’s covenants under the lease.
This case comes as a timely reminder to both landlords and tenants to be aware of both their contractual and statutory obligations in relation to service of notices.
As a tenant remember to:
- check the terms of your lease carefully both in respect of service of notices and what requirements a landlord may make on you following an application;
- provide as much information as possible in the first instance when making applications for consent and inform your landlord whether the application it time critical; and
- make sure you keep a note of how and when the notice is served.
As a landlord, in the event you receive a notice:
- act promptly and review the notice;
- check the terms of the lease to ensure compliance in terms of service;
- keep an eye on timing.