When a landlord can reasonably withhold consent to alterations: case analysis

What the recent decision in Messenex Property Investments Ltd v Lanark Square Ltd [2024] EWHC 89 (Ch) (23 January 2024) adds to our understanding of when a Landlord can reasonably withhold consent to alterations.

It is well established that a landlord is not entitled to withhold consent to alterations unreasonably.  Section 19(2) of the Landlord and Tenant Act 1927 reads into all leases that require landlord’s consent to alterations that the consent not be unreasonably withheld, subject to payment of reasonable legal or other expenses properly incurred by the landlord, amongst other things, and “notwithstanding any express provision to the contrary”.

In the case in question the claimant was seeking a declaration that it could carry out two sets of works, notwithstanding the requirement for landlord’s consent to the works, on the grounds that this consent had been unreasonably withheld.  The two sets of works were the addition of three extra floors to the top of the building and works to convert the ground floor from commercial to residential use.  The lease of the building contained covenants that no additional building or structure etc could be erected “without the prior consent in writing of the Lessor which shall not be unreasonably withheld or delayed”, no alterations or addition to the main structure… or any alterations in the external appearance or layout… without “the prior written consent of the Lessor (such consent not to be unreasonably withheld or delayed)“.  There was an anti-nuisance covenant and also a covenant against overloading the floors or roof-structure.  The lease was varied to include a right to park up to 16 cars in the basement parking area and ground floor car park.

The tenant successfully obtained planning permission for each of the rooftop and ground floor works in 2020 and, later, in 2021.  Application was then made to the solicitors acting for the head tenant in May 2020 for consent to the rooftop works, and then in June 2020 application for consent to the ground floor works.  There was an amount of back and forth between the parties before, in July 2020, the solicitors acting for the head tenant sent a document setting out the information they would require to enable a decision to be made in respect of each of the rooftop works and the ground floor works and the process involved.  Request for costs undertakings for legal fees in respect of each consent were also asked of the tenant’s solicitors.

The costs were agreed in September 2020 and documentation regarding the works was supplied.  A further costs undertaking in respect of architect’s and surveyor’s fees was asked for and given in October 2020.  A draft licence to alter for the rooftop works was issued.  The need for a “site compound licence” was proposed for the storage of materials during the works at a cost of £350 per week.    It transpired that the bicycle storage area depicted in the original plans was located in an area of the basement not demised to the tenant.  The planning permission was then varied to include the bicycle storage area on the ground floor.

In November 2020 the draft licence for the rooftop works was returned to the head tenant’s solicitors amended to include the ground floor works as well as the rooftop works.  They were told that separate licences for each of the rooftop and ground floor works would be required and the additional one would be drafted.  The issue of outstanding service charges was raised.  The tenant’s solicitors then proposed the use of their parking spaces on the basement or ground floor for site storage.  This idea was swiftly dismissed by the head tenant’s solicitors and further discrepancies in the plans were pointed out.  They also then said that a scaffolding licence would be required at a charge of £250 per week.

By August 2021, revised approved drawings for both the rooftop works and the ground floor works had been supplied. The drawings showed no use of the basement as storage or a site compound; and the bicycle store located on the ground floor.  Between August and November 2021 the terms of each of the licences were negotiated, with the final points – completion times, level of indemnity and the cost of a hoist and scaffold licence – were resolved by December 2021.  Legal fees of £6,000 were agreed and clean copies of both licences sent for approval along with a request for “a full set of plans” to be included in the engrossments.

Between December 2021 and April 2022 there was an amount of back and forth regarding plans and documents to be included in the licences, in particular outstanding structural engineer’s drawings.  It looked to all be agreed by May of 2022.  However, by the end of the month an email was sent describing “some confusion surrounding the plans” and the request again for a site compound licence reared its head (using the existing spaces under the lease variation and at a cost of £50 per car parking space per week and a £10,000 damage deposit).  A further costs undertaking of £2,000 was requested in connection with the site compound licence and, later, the outstanding service charges, again.

In November 2022 the tenant’s solicitors advised they had instructed counsel to draft proceedings in relation to the unreasonable withholding of consent to the alterations.  The head tenant’s solicitors then responded saying that a pre-condition to the completion of both licences would be payment of the outstanding service charges, they would have to take a licence of all of the car parking spaces (rather than just an option for the ones they may use) and a request for a further undertaking for legal costs of £3,500.  There was then some back and forth on the service charges and the parking spaces.  The tenant’s solicitors were only willing to provide a qualified undertaking for costs, namely: that the licences must be completed within 14 days and, if they were not, the undertaking would be withdrawn.  This was refused in December 2022 and, at the end of March 2023, the tenant issued proceedings.  The planning permission for the rooftop works lapsed as a result of the delay in gaining landlord’s consent.

To put all of the above in context: it was May 2020 when consent was initially sought from the landlord for the first set of works.  The first national lockdown during the coronavirus pandemic was between March and June, proceedings were issued in March last year and the case was heard in November 2023.

The issues concerning the judgement were the reasons given for withholding consent to the alterations and whether those were reasonable.

The reasons set out in the judgement for withholding consent were: the tenant was asked to provide, but failed to provide, structural engineer’s drawings; the works involved trespass on property retained by the head tenant (namely, the area surrounding the building not within the tenant’s demise); the tenant failed to provide unconditional undertakings for the head tenant’s reasonable costs;  there was a lack of clarity in the tenant’s proposals.

The following question needed to be answered: “Which (if any) of those reasons were reasonably held and was the landlord acting reasonably or unreasonably within the meaning of clause 3(f) of the Lease (this was an express requirement to not unreasonably withhold or delay consent) in failing to give consent to the works by the time these proceedings were issued?”

Counsel for the head tenant stated that it was not necessary for them to show all of its reasons were reasonable. If the court found that some of its reasons were good reasons for withholding consent, it should be regarded as having acted reasonably in withholding consent.  This was a view partially held with reference to the decision in No.1 West India Quay (Residential) Limited v East Tower Apartments Ltd [2018] EWCA Civ 250.

After consideration of the failure to supply detailed structural engineer’s drawings as a reason to withhold consent, the judge held that it was not unreasonable to withhold consent on this basis.

The issue of trespass on retained land was dismissed (after lengthy consideration) as a reasonable issue in withholding consent as this had been resolved by the time of the issue of proceedings.  Similarly, the outstanding service charges was thought not sufficiently related to the works themselves to be deemed a reasonable cause to withhold consent.  However, the refusal to provide an unconditional undertaking in respect of the landlord’s costs was considered a legitimate reason to withhold consent to the grant of the licences.  The lack of clarity in terms of the works justification for withholding consent was not considered sufficiently reasonable.

The decision in Messenex Property Investments Ltd v Lanark Square Ltd [2024] EWHC 89 (Ch) (23 January 2024) followed that of No.1 West India Quay (Residential) Limited v East Tower Apartments Ltd [2018] EWCA Civ 250 in that, where some of the arguments advanced for withholding consent were reasonable and some were not, the decision itself was in fact reasonable, in this case regarding the failure to supply structural drawings and the concern over the structural integrity of the building as a whole.

In summary, if consent to alterations is being withheld and you are looking to ascertain if this is reasonable – you should consider whether the tenant has kept back some vital information preventing the landlord from making an informed decision as to the effect of the works on the structural integrity of the building.