Upcoming Events :
Housing Seminar: Partnerships with the Public Sector – Avoiding the pitfalls
Thu 31 May 2012
Minerva House, 5 Montague Close, London, SE1 9BB
Court of Appeal Reviews Conditional Contracts and Landlord’s Consent
Fri 03 Feb 2012
WS successfully appealed a decision of the High Court on landlord’s consent yesterday. A Court of Appeal led by Lords Justice Carnwath and Etherton and Mr Justice Briggs found that a conditional contract requiring consent to be in the form of a tri-partite deed meant, on the plain reading of the document, any lesser consent was not binding.
An agreement for leases for office premises had been drafted to include specific provisions requiring any consent by the superior landlord to be a document executed by superior landlord, landlord and tenant and delivered in the form of a tri-partite deed. This was important as the proposed under letting to the tenant was outside the scope of permitted assignments in the head lease. The agreement reserved the right for either landlord or tenant to terminate the agreement if consent in the form specified had not been achieved by a longstop date. After the longstop date, the deed was signed by both landlords but not tenant but there had been no delivery of the deed or exchange of counterparts and the superior landlord was seeking its costs before completion could take place. The tenant, having concerns about the condition of the premises decided to exercise the right to terminate the agreement. The landlord began proceedings for damages for breach of contract arguing that the usual rule in Mount Eden applied once superior landlord’s consent had been granted in principle, even though there was no contractual or statutory mechanism to compel the superior landlord to complete the deeds if it later changed its mind. The High Court (Mr Justice Knowles) found that there had been a breach of contract once consent in principle had been given.
On appeal, the Court of Appeal found that the intention of the draftsmen was plainly to prevent any uncertainty where consent of the superior landlord was given in principle, by requiring consent only to be binding once given by deed, executed and delivered by all parties. This was the only way to avoid the uncertainty caused sometimes by a Mount Eden situation. It was particularly important as the parties would be at risk of forfeiture of the lease and under lease if the deed was not completed and the under letting purportedly proceeded, given that the proposed under letting was prohibited by the head lease. The claim was dismissed and the appeal allowed.
The case has particular significance in the it reinforces the right of parties to commercial lease agreements to make any agreement conditional until certainty over consent can be assured, particularly where a proposed letting is not one where the superior landlord can be obliged to act reasonably by statute or by its leasehold obligations. It is likely to be useful to real estate transactional lawyers and draftsmen of commercial leases.
Rail Safety and Standards Board Limited v British Telecommunications PLC (31.01.12)
Winckworth Sherwood for the Appellants, RSSB, with Nicholas Taggart of Landmark Chambers
