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Case serves as warning to tenants.

Byline: GAVIN WINTER

THE recent High Court case of E.ON UK plc v Gilesports Ltd gives a useful reminder of the pitfalls for a tenant associated with failing to obtain consent to an assignment of a leasehold interest. It also highlights the importance of serving an application for consent correctly.

The Landlord and Tenant Act 1988 imposes a duty on landlords to respond in writing, and within a reasonable time, to any application by their tenant to assign, underlet, charge or part with the possession of their premises. The landlord must respond in writing, stating whether or not the tenant can proceed and setting out any conditions the landlord wishes to impose or reasons for refusing consent.

The Act is useful for tenants as, if a landlord fails to respond within a reasonable time, he is in breach, and the tenant can proceed with the transaction or apply to court for a declaration that a breach has occurred and that the transaction can proceed.

The duty is, however, only triggered once the tenant has served a written application for consent. Any application must be served in a manner provided for in the lease or, if silent, in accordance with section 23 of the Landlord and Tenant Act 1927, which permits various methods of physical delivery.

The facts of this case are quite complicated but can be summarised as follows. The tenant sought to assign its lease and asked for consent by email - 11 days passed and the landlord raised no objection. The tenant assigned the lease, did not tell the landlord that the assignment had taken place and, later, the assignee went into administration.

The landlord sought recovery of rent from the tenant based on consent having not been given and the tenant was still liable. The tenant said the landlord had unreasonably delayed consent and it was therefore entitled to assign. The landlord argued that there were specific notice requirements in the lease which would trigger the statutory duty and, as the email had not met the requirements, the duty had not arisen.

The Court found in the landlord's favour. It said the tenant should have followed specific notice requirements and, because it did not, the statutory duty did not arise. The Court also held that, even if correct notice had been given, 11 days was an insufficient time period in which to expect the landlord to reach a decision.

The lessons to learn is that tenants applying for consent to a transaction should be careful to ensure that their application is served in accordance with the relevant notice provisions, and Landlords who receive these applications should be careful not to accept a defective method of service unnecessarily. Gavin Winter is an associate in the property litigation department at Watson Burton LLP
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Title Annotation:Features
Publication:The Journal (Newcastle, England)
Date:Oct 24, 2012
Words:464
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