Reading the Clause That Decides the Case
A lease contains the following clause: "The Tenant shall not assign this Lease without the Landlord's consent, which consent shall not be unreasonably withheld, provided that the Tenant has paid all Rent due at the date of the request and has provided the Landlord with such information as the Landlord may reasonably require." The tenant, a small bakery, seeks consent to assign to a chain supermarket. The landlord refuses, citing (a) the proposed assignee's business is 'not in keeping with the character of the building' and (b) the tenant was two days late with the previous quarter's rent, now paid. The tenant has provided all requested financial information. The lease has 14 months to run.
1. Explain what the clause requires of the landlord and whether either ground of refusal is likely to be sustainable.
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The clause creates a qualified prohibition: assignment is prohibited without consent, but consent may not be unreasonably withheld. The proviso adds two conditions the tenant must satisfy before the obligation is engaged: rent paid up at the date of request, and reasonable information supplied.
On the facts, the tenant has supplied all requested information. The rent was two days late but has since been paid. The question is whether the proviso requires rent to be paid at the date of the request. If the arrears had been outstanding at that date, the landlord could rely on the proviso. Because the rent was paid before the request (or at least before refusal), the proviso is likely satisfied, and the landlord's discretion is then governed by the reasonableness standard.
Ground (a) is weak. A refusal based on the 'character of the building' is impressionistic; reasonableness requires the landlord to identify a legitimate commercial interest, such as diminished rental value, increased risk of default, or breach of a user covenant. A supermarket may in fact strengthen the covenant. Ground (b) is also weak because a cured two-day delay is a historic, trivial matter and not a rational basis for refusal, especially with only 14 months left on the term. A court would likely find the refusal unreasonable.
2. Draft a short letter from the tenant's solicitor to the landlord that preserves the tenant's position without conceding the clause is satisfied.
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A model letter would do four things: state the request, set out the clause, challenge the refusal, and reserve rights.
Dear Sir/Madam,
We act for the Tenant under the lease dated [date] relating to [premises]. Our client requested consent to assign to [assignee] on [date]. By your letter of [date] you refused consent on two grounds.
We do not accept that either ground is reasonable. First, the proposed assignee is a substantial covenant-strength tenant whose use is consistent with the permitted use. Second, any rent delay had been cured before the request and cannot found a refusal. The information requested was provided in full.
Our client reserves all rights, including the right to seek a declaration that consent has been unreasonably withheld and to recover losses caused by the delay. Nothing in this letter is an admission that the proviso to the clause has been satisfied, and our client's position on that point is expressly reserved.
Please respond within seven days.
The reservation sentence is the key drafting move: it keeps the proviso argument alive while pressing the reasonableness argument.