The Supreme Court has overturned the Court of Appeal’s decision that the landlord Sequent, then known as Rotrust, had unreasonably withheld consent to Hautford’s application for permission to make a planning application.
The case concerns a terraced mixed use building in Brewer Street, Soho, let on a long lease. Sequent is the landlord and Hautford is the tenant. The Lease contains a tenant’s covenant not to apply for planning permission without the prior written consent of the landlord, such consent not to be unreasonably withheld.
The previous owner of the freehold refused consent for Hautford to apply for planning permission to change the use of the first and second floors of the building to residential use where such use was already permitted under the Lease. Rotrust continued to refuse consent.
The principle grounds for refusing consent were that such change of use would increase the prospect of Hautford making a successful enfranchisement claim under the Leasehold Reform Act 1967 (“the LRA”) and, in addition, such enfranchisement would damage Rotrust’s management of the Soho Estate.
At first instance, the trial judge held that such a refusal was unreasonable. The Court of Appeal upheld the trial judge’s decision and found that Rotrust was attempting to re-write the terms of the Lease that permitted residential use. The Court of Appeal also concluded that estate management considerations arising on enfranchisement are sufficiently addressed in the relevant part of the LRA.
However, the Supreme Court, by a majority of 3:2, concluded that the requirement to obtain consent prior to making a planning application was an additional safeguard to protect the landlord against the risk of enfranchisement notwithstanding the tenant was permitted to use the property for residential purposes under the terms of the Lease.
Delivering powerful dissenting judgments, Lady Arden and Lord Wilson both supported the findings of the lower courts. Lady Arden highlighted that in her view, the power to refuse consent to a planning application was not granted to enable the landlord to cut down the user clause. Lord Wilson raised the point that the permitted user clause was 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.
Partner Mark Steggles commented “The nature and force of the two dissenting judgments demonstrate why these proceedings were necessary and the closeness of the decision. Whilst the Supreme Court’s decision ultimately provides clarity to the parties involved, the leading judgment leaves questions unanswered that suggest some of the issues raised in this case are likely to be revisited by others in the future.”
Tiffany Scott QC & Charlotte Black of Wilberforce Chambers acted for Hautford. A link to the judgment can be found here: https://www.supremecourt.uk/cases/docs/uksc-2018-0098-judgment.pdf
