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Delay can cost you money.

Byline: By Richard Freeman-Wallace

Commercial leases have to be assigned within a 'reasonable time'. Landlords must deal with tenants' applications to assign or sub-let without undue delay, according to the Landlord and Tenant Act 1988.

What is a 'reasonable time'? According to the High Court, the answer is "not very long at all". There have been a number of cases disputing what is meant by the phrase.

It was said to be measurable in weeks rather than months (Go West v. Spigarol, 2003). A subsequent decision then said that urgent cases must be dealt with more quickly (Mount Eden v. Folia, 2003), and one case allowed just one week (Blockbuster Entertainment v. Barnsdale Properties, 2003).

In another it was accepted that, once all information was to hand, a decision could be made within one day (Design Progression v. Thurloe Properties, 2004).

In Design Progression v Thurloe Properties, the tenant wished to assign the remainder of its lease to another party. The landlord, however, deliberately blocked the assignment because he wanted to grant a fresh lease on more profitable terms.

He also hoped to negotiate a surrender of the lease by the tenant without paying over a premium by pushing her into an impossible position, unable to get the assignment she needed.

The High Court would have none of it. The landlord was in breach of his statutory duty under the first section of the Landlord and Tenant Act 1988 and he would have to pay up.

In this case, the landlord continued to prevaricate long after he had all the information required to make his decision.

The High Court took exception to the landlord's behaviour and ruled that it merited punishment. The court also disliked the calculated way in which he had sought to make a profit, which might well have exceeded the compensation payable to the tenant.

The tenant was awarded damages against a landlord who, in the eyes of the court, behaved 'cynically and unscrupulously' in delaying consent to a lease assignment. The landlord was ordered to pay pounds 25,000 exemplary damages as a result.

It was the first time that such damages have been awarded in this situation. The court's decision serves as a strong warning to landlords that unnecessary, deliberate delay can cost money, goodwill and legal fees.

In Blockbuster Entertainment Limited v Barnsdale Properties Limited, the judge ruled that, once the tenant had complied with the landlord's request for more information, then "it should have seen that there was no basis for withholding consent and should have given its consent within a week".

Tenants have the right to seek exemplary damages if they believe a landlord is being unduly obstructive. These are awarded in addition to ordinary damages.

A landlord should take care to ensure that he has all the information necessary in order to reach an informed decision without causing an unreasonable delay.

While the 'reasonable time' requirement is intended to protect the tenant, it also allows the landlord a fair chance to consider the application.

The important lesson for landlords is not to sit on a tenant's application and that a reasonable time for dealing with the application may be a very short period indeed ( perhaps even days.

Landlords should also be careful about refusing an application too hastily, which may constitute a breach of the Landlord and Tenant Act. This would deprive the landlord of any further opportunity to reconsider his decision. The moral is simple. Landlords must not delay the process of an application for a licence to assign any longer than is strictly necessary. Otherwise, they will face costly damages.

Richard Freeman-Wallace is head of property at law firm Watson Burton in Newcastle.
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Copyright 2007 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Business
Publication:The Journal (Newcastle, England)
Date:May 30, 2007
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