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There was, as at that date, no real risk of enfranchisement. Ratio |
On the judges findings, planning permission, if requested, was likely to be granted, and the consequence would significantly increase the risk of enfranchisement which would, in turn, have a real rather than purely theoretical adverse consequence in terms of the value of the freehold reversion to the appellant. Ratio |
No third party had applied, or was threatening to apply, for similar planning permission for change of use. Ratio |
Applying Lord Binghams first principle in the Ashworth Frazer case, it cannot possibly be said that seeking to avoid a significant increase in the risk of enfranchisement, with consequential damage to the reversion, was something extraneous to or dissociated with the landlord and tenant relationship created by the Leas... |
On the contrary, damage to the reversion is the quintessential type of consideration rendering reasonable the refusal of consent, as is illustrated in particular by the dicta (quoted above) in the Kitway case. Ratio |
Applying the second principle, a down to earth factual analysis of the economic consequences to the landlord of giving or refusing the requested consent in the present case plainly suggests that a refusal is reasonable. Ratio |
Applying the third principle, the appellant did not need to show that a refusal was right or justifiable, but merely that it was reasonable. Ratio |
In my opinion it clearly was. Ratio |
For those reasons I would allow this appeal. RPC |
I have come to the conclusion that this appeal should be dismissed effectively for the reasons given by the Court of Appeal and the judge. RPC |
The first step is to examine the scope of the power of the lessor to refuse its consent to a planning application and this can only be done by interpreting clause 3(19) in the context of the lease in the usual way. Ratio |
The most relevant circumstances to take into account are the other provisions of the lease, including the lessees unrestricted right to use the whole of the premises if he wishes to do so for residential purposes. Ratio |
I do not agree that this sub-clause must be read subject to the lessee first obtaining the lessors consent to a planning application for a change of use (where that is required) or that, as Lord Briggs has concluded, the right to use the premises for residential purposes was limited to those parts for which planning co... |
That would involve writing words into the user clause as opposed to treating the lessors power reasonably to refuse its consent in clause 3(19) as impliedly limited to other aspects of a planning application. Ratio |
The lessor would have been ill-advised to rely on his power to withhold his consent to a planning application as a means of preventing the lessee from improving his chances of obtaining leasehold enfranchisement because a third party, such as a developer, could obtain that consent free from the restrictions in the leas... |
It is not a point which is ultimately in the lessors favour that at the date of the lease the lessee could not apply for leasehold enfranchisement though he could have done if he had been an individual. Ratio |
It was only possible for a company to apply as a result of a subsequent amendment. Ratio |
The lessee was, however, from the date of the lease free under clause 3(13) to assign the whole of the premises to an individual who would have been free to apply for leasehold enfranchisement when he met the conditions as from the date of the lease. Ratio |
The lessor must be taken to have been aware of this. Ratio |
The key point in Lord Briggs judgment is that the lessor was entitled to protect the value of his reversion against a substantial increase in the chances of the lessee achieving leasehold enfranchisement and thus destroying the lessors interest in the reversion. Ratio |
I have no doubt that the lessor can seek to protect his own interests when exercising power to refuse consent in this way, but only when that is within the purposes for which the lease permits him to use the power to refuse consent. Ratio |
On my interpretation of the lease, the power to refuse consent to a planning application was not granted to enable the landlord to cut down the user clause. Ratio |
Lord Briggs considers that in Bickel v Duke of Westminster [1977] QB 517, 524 (which was approved by the House of Lords in Ashworth Frazer) Lord Denning MR held that the landlord could reasonably refuse consent to an assignment on the grounds that it gave rise to an increased risk of enfranchisement in spite of the fac... |
I do not agree that that is the way to read Lord Denning MRs judgment. Ratio |
In my judgment, it is clear that Lord Denning MR attached considerable weight to the fact that the parties had not known about the possibility of enfranchisement when they entered into the lease. Ratio |
Enfranchisement was something of a windfall for the tenant. Ratio |
Lord Denning MR held, at pp 524-525: I have studied all the previous cases and find little guidance in any of them to solve our present problems. PRE |
The reason is simply because it is a new situation, consequent on the Leasehold Reform Act 1967, which was never envisaged before. PRE |
I would test it by considering first the position of the landlords - the Grosvenor Estate. PRE |
They hold a large estate which they desire to keep in their hands so as to develop it in the best possible way. PRE |
This would be much impeded if one house after another is bought up by sitting tenants. PRE |
Further, if they are compelled to sell under the Leasehold Reform Act, they will suffer much financial loss, because the price is much less than the value of the house. PRE |
Test it next by considering the position of the tenants - the Foresters. PRE |
They hold the premises as an investment and want to sell it. PRE |
It matters not to them whether they sell to the landlord or to sub-tenants, so long as they receive a fair price for it. PRE |
The landlords say they are willing to negotiate a fair price for it. PRE |
They will give the Foresters a sum equivalent to that offered by the sub-tenants. PRE |
Test it next by considering the position of the sub-tenant herself. PRE |
When she took her sub-lease, she had no possible claim to enfranchisement. PRE |
It was at a high rent, outside the Act of 1967. PRE |
She is quite well protected by the Rent Acts so far as her own occupation is concerned. PRE |
She will not be evicted at the end of her term. PRE |
The only result on her of a refusal will be that she will not be able to buy up the freehold for a very low figure. PRE |
Lord Denning MRs insight was that it was not appropriate to decide the unreasonableness of consent to assignment, as Orr and Waller LJJ did, by reference to whether the circumstances of the proposed assignment were abnormal. Ratio |
They based their conclusion on the availability of enfranchisement following assignment, when that was not available at the date of the lease. Ratio |
Lord Denning MR considered that the court should make an assessment of all the relevant considerations to determine whether the consent was unreasonably refused. Ratio |
In Ashworth Frazer v Gloucester City Council [2001] 1 WLR 2180 at p 2183, Lord Bingham held that Lord Denning MRs approach was the correct one. PRE |
The other members of the House of Lords agreed with Lord Bingham or, in the case of Lord Rodger of Earlsferry, that Lord Denning MR was correct to hold that the question whether the refusal of consent was reasonable was one of the circumstances of the case, and not of law (see para 74 of Lord Rodgers speech). PRE |
Here the parties cannot have intended that the lessor should be able to protect itself against the increased risk of leasehold enfranchisement, resulting from an increased use of the premises for residential purposes, by using the power to refuse consent to a planning application when the lessee could assign to an indi... |
This would be so even if the circumstances at the date of the application were that the risk stood to be substantially increased and the lessor might lose his right to the reversion completely. Ratio |
In those particular circumstances, I consider that the judge and the Court of Appeal were entitled to conclude, and right to conclude, that it would be unreasonable for the lessor to use clause 3(19) for such purpose. Ratio |
Like Lady Arden, I would have dismissed this appeal. RPC |
Clause 3(11) of the Lease is crucial. Ratio |
I would therefore dismiss the appeal essentially for the reasons given by the Court of Appeal and the judge. RPC |
In the letter dated 17 April 2015 by which, through its solicitors, the leaseholder sought the freeholders consent under clause 3(19), it suggested that clause 3(11) was crucial. Ratio |
So did the trial judge and the Court of Appeal. Ratio |
The subclause bears recital again. Ratio |
It is a covenant by the leaseholder (11) Not to use the Demised Premises otherwise than for one or more of the following purposes (a) retail shop (b) offices (c) residential purposes (d) storage (e) studio PROVIDED however that nothing herein contained shall imply or be deemed to be a warranty that the Demised Premises... |
Clause 3(11) is not a common form, or boilerplate, subclause. Ratio |
It is a bespoke subclause of singular generosity to the leaseholder. Ratio |
One result of it is that the Lease goes further than to omit to prohibit the use of any part of the premises for residential use. Ratio |
Its effect is specifically to permit residential use of every part of them. Ratio |
Indeed the permission is unqualified by any requirement to secure the freeholders prior consent to the proposed use. Ratio |
The proviso which excludes any warranty on the part of the freeholder about accordance with planning laws in no way detracts from the width of its permission. Ratio |
The trial judge was right to note another subclause which, albeit of some triviality, addresses the prospect of residential use of the premises, not limited to the third and fourth floors. Ratio |
It is part of clause 3(15)(c), by which the leaseholder covenanted not to permit animals of any kind to be kept [on the demised premises] except that (1) domestic animals may be kept with the consent of the Lessor and (2) this provision regarding animals shall not apply to the existing residential sub-tenants of the up... |
The generosity of clause 3(11) to the leaseholder was no doubt a feature of the Lease which was reflected in the premium paid to the freeholder by the initial leaseholder for it and in the premiums paid for the later assignments of the lease and of the freehold reversion respectively. Ratio |
In Soho, unlike in many parts of England and Wales, a change in the use of premises from office use or use ancillary to retail to residential use represents unlawful development unless it has been the subject of planning permission. Ratio |
Unlike clause 3(11), clause 3(19) is a boilerplate clause. Ratio |
The leaseholders usual covenant not to apply for any planning permission without the prior written consent of the Landlord such consent not to be unreasonably withheld generates this litigation. Ratio |
I agree with Lord Briggs that the meaning of the leaseholders covenant in clause 3(19) is clear and generates no issue of construction. Ratio |
I also acknowledge that, within their overarching inquiry into the reasonableness of the freeholders withholding of consent, the judges in the lower courts found it helpful to consider the purpose of the covenant. Ratio |
For my part, I find that perspective less helpful than they did. Ratio |
I prefer to go straight to that one word: unreasonably. Ratio |
Were it reasonable for the freeholder not to consent to an application by the leaseholder to apply for permission to make residential use of the first and second floors, the provisions of clause 3(11) would be deprived of substantial effect. Ratio |
Instead of the unqualified permission for residential use there given, the permission, in so far as it relates to the first and second floors, would become a fully qualified permission. Ratio |
I agree with Sir Terence Etherton MR, at para 47, that, to that extent, any permissible withholding of consent in such circumstances would in effect rewrite clause 3(11). Ratio |
Like the courts below, I cannot accept that an express grant of permission for residential use can - reasonably - be overridden by the freeholders deployment of an entirely unfocussed provision in relation to applications for planning permission. Ratio |
However legitimate its concern about the prospect of enfranchisement, the freeholder cannot - reasonably - withhold its consent if the effect of doing so is to negate the permission for residential use which it granted and for which it received valuable consideration. Ratio |
Our duty is to appraise the trial judges determination that the leaseholder had established that the freeholder was unreasonably withholding its consent to the application. Ratio |
I happen to agree with the judges determination. Ratio |
But, more importantly, I see no significant flaw in the manner in which he approached it. Ratio |
The Court of Appeal was in my view right to conclude that his determination ought to be upheld. Ratio |
In my respectful view the contrary conclusion of the majority falls foul of the second overriding principle articulated by Lord Bingham in the Ashworth Frazer case, set out in para 22 of the judgment of Lord Briggs. Ratio |
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