Landlord refusal to consent to a tenant's planning application for change of use

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26 November, 2019

Sequent Nominees Ltd v Hautford Ltd [2019] UKSC 47

What happened in this case?

This case concerned a six-storey building let to the tenant. The lease provided that the tenant may not apply for planning permission without the landlord's consent, which must not be unreasonably withheld.

The tenant converted 4 floors of the building into self-contained flats. The lease allowed the tenant to use the building for residential purposes. However, it also stipulated that the tenant may not apply for planning permission without the landlord's consent, which must not be unreasonably withheld.

Consent was sought, but the landlord refused on the ground that if the majority of the building became residential then the tenant may have a right to compulsorily acquire the freehold under the Lease Reform Act 1967 (known as enfranchisement). This risk of such enfranchisement would devalue the landlord's interest in the property.

The tenant challenged the refusal on the grounds that it was unreasonable. The County Court, the High Court and the Court of Appeal found for the tenant. The landlord appealed to the Supreme Court.

The Law - Leasehold reform Act 1967

The act grants the right to long leaseholders of houses to buy their freeholds from their landlords at a fair price. Initially the 1967 Act only applied to homes below a certain value, but the act was subsequently amended to expand these rights to properties with higher rateable values. This had the perhaps unintended consequences of expanding enfranchisement opportunities.

What is enfranchisement?

Leasehold enfranchisement is the process you go through to either extend your lease or purchase the freehold (or a share in it, in the case of a flat).

What was decided?

Giving the leading judgement, Lord Briggs decided that there were consequences to the landlord in refusing consent and so the refusal in this case was reasonable.

The increased risk of enfranchisement was a valid excuse to refuse consent, despite the lease allowing residential use.

What have we learnt from this case?

There is much discussion as to whether a future risk to the value of the landlord's interest is sufficient grounds to refuse consent.

This decision clears up issues as to whether or not a landlord can withhold consent to alter, assign or change use due to the potential risk of future enfranchisement.

For more information contact Laura Hallett Lea in our Business Dispute Resolution department via email or phone on 0333 207 1141. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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