On 30 October 2019 the Supreme Court overturned a Court of Appeal decision on Sequent Nominees Limited v Hautford Limited, which ruled that a landlord had acted unreasonably in refusing its tenant’s request for permission to submit a planning application for a change of use to residential.
The decision gives useful guidance on the correct approach to be taken in dealing with applications for consent under leases.
In this case, the tenant wanted to change the use of the first and second floors of the property to residential use. The top two floors were already in residential use. Consent was refused on the basis that the change of use would increase the prospect of a successful enfranchisement, which would deprive the landlord of the reversion in the property and control of the block which contained the property.
Both the High Court and the Court of Appeal held that the refusal of consent was unreasonable.
The landlord appealed and the Supreme Court has allowed the appeal by a majority of three judges to two, ruling that the landlord's refusal of consent was reasonable.
The Supreme Court has held that the lower courts made an error of law because their interpretation of the lease was too limited. It was legitimate for a landlord to resist a significant increase in the risk of enfranchisement because it served a purpose that was sufficiently connected to the landlord and tenant relationship. In this case the refusal was reasonable because of the economic consequences to the landlord of giving or refusing consent.
This is a helpful decision for landlords in general. However, it may not be the end of the matter for this particular landlord. The courts at every level have seemed to accept that the landlord would be unable to stop a third party from applying for the very planning permission that the tenant wanted. If that is correct and such an application were made, it would give rise to the same risk of enfranchisement and the landlord's successful appeal might prove to be a short-term victory.