11 December 2019
The Supreme Court held, by a 3:2 majority, that the risk of enfranchisement was a reasonable ground for a landlord to withhold consent to a tenant's planning application to change use of a property from offices to residential.
A 3:2 split in the Supreme Court overturned a unanimous Court of Appeal decision which illustrates that this issue was hard fought and highly contested.
The facts are set out in our previous article following the Court of Appeal decision.
Lord Briggs confirmed the three relevant principles that apply to the reasonableness of refusal of consent to the making of a planning application (which arise from case law dealing with assignment):
It was held that, by applying the principles, the ground for refusing consent was related to the relationship of landlord and tenant. Based on these facts, it was considered that refusal was reasonable and there was no need to show that it was right or justifiable. Accordingly, the appeal was allowed and the landlord declared reasonable in its refusal of consent to the tenant's planning application.
The fact that the lease was granted after 1967 (when the Leasehold Reform Act 1967 was introduced giving a statutory right to tenants of "houses" to purchase the freehold) did not prevent the landlord from relying on the risk of enfranchisement as a reasonable ground to refuse consent.
It is interesting to note that Lady Arden dissented on the basis that it would be unreasonable for the landlord to withhold consent in circumstances where the tenant could assign to an individual who, even at the commencement of the lease, had the right to enfranchise and where any necessary planning permission for change of use could be obtained by an assignee with no involvement of the tenant.
Lord Wilson's reasons for dissenting were that the landlord's conduct was unreasonable on the facts because it was unreasonable for consent to be withheld if the effect of this is to negate the permission for residential use which it granted and for which it received valuable consideration.
This decision is good news for landlords who want to protect their portfolios from enfranchisement by tenants, although whether or not the risk of enfranchisement is a reasonable ground for refusing consent will be a question of fact and degree and each case will be viewed at the date of the tenant's application for landlord's consent.