Without consent

Lease clauses that permit a tenant to act without requiring their landlord’s consent can be a valuable concession, but as Bill Chandler warns, should be exercised with caution.

Tenants under most commercial leases can expect that they will need to seek the consent of their landlord whenever they wish to dispose of their lease (whether by way of assignment or subletting), mortgage their interest, carry out alterations, or change the use to which the premises are put.

A combination of standard lease clauses and statutory provisions usually requires the landlord to act reasonably and not hold the tenant to ransom. Even so, obtaining consent can frequently become a costly and time consuming exercise for the tenant.

Tenants with sufficient bargaining power may therefore seek to negotiate leases which allow them to carry out – without consent – relatively uncontroversial actions, which the tenant can foresee may be necessary during the term of the lease; perhaps allowing signage and other alterations to reflect the tenant’s latest corporate branding, or allowing the lease to be assigned within the same corporate group. These concessions are frequently expressed to be personal to the original tenant and members of the same group.

A recent case has emphasised that tenants need to be vigilant when taking advantage of such clauses. The lease in K/S Victoria Street -v- House of Fraser (Stores Management) Limited contained an alienation clause (clause 3.15) which required the landlord’s consent to any assignment of the lease. It also contained various pre-conditions to assignment, including a requirement that the prospective assignee must be of equivalent financial standing to the outgoing tenant.

However, House of Fraser had negotiated a sub-clause (F) within the alienation clause, which provided that no consent was required to an assignment of the lease by one House of Fraser group company to another, provided House of Fraser plc acted as guarantor.

K/S Victoria Street and House of Fraser had already been to court once in autumn 2010, to establish whether House of Fraser plc could guarantee successive tenants on an intra-group assignment, following the decision in the Good Harvest case. The assignment in question was required by the agreement for lease and was being pursued by the landlord against a reluctant House of Fraser company which no longer wished to take the assignment, following changed economic conditions since the agreement for lease was entered into.

At that preliminary hearing, the court had confirmed Good Harvest and ruled that the parent company could not guarantee the assignee in circumstances where it was already guaranteeing the outgoing tenant. The requirement for the parent company guarantee therefore fell away, but that did not remove House of Fraser’s obligation to assign the lease.

The parties arrived back in court shortly after, because House of Fraser was threatening to immediately re-assign the lease to a worthless group company on the basis that sub-clause (F) permitted intra-group assignments without consent.

The court, however, adopted a narrow interpretation of sub-clause (F) and ruled that it only dispensed with the need for consent; it did not dispense with the need to comply with the other pre-conditions to assignment, prescribed by the remainder of clause 3.15, including the ‘equivalent financial standing’ test.

Each case will inevitably turn upon its own facts and the drafting of the particular lease in question. But this decision highlights the need for tenants to think twice – and take professional advice – before rushing head-first into any assignment, subletting or alterations on the basis of a lease clause which appears to allow the tenant to take the action ‘without consent’.

Bill Chandler is a Legal Director at Hill Dickinson LLP.  He can be contacted on 0151 600 8725 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..