Mahmood v Lola & Anor

A landlord’s consent to an assignment is effective only if the conditions attached to that consent have been satisfied. A draft licence is not itself a licence to assign where the landlord requires the incoming tenant to enter into a binding agreement, such as an authorised guarantee agreement. The question is whether consent was in fact given, assessed by construing the relevant documents and surrounding circumstances. A case in which all conditions had been accepted and the proposed formal licence was merely a formality is materially different.

Mr Mahmood agreed to assign a lease and transfer a fast-food business to Mr Lola. The agreement made completion conditional on Mr Lola receiving a licence to assign from the landlords, and required the purchase money to remain with solicitors as stakeholder until that licence was received.

The landlords’ solicitors sent a draft licence containing an authorised guarantee agreement. Mr Lola’s solicitors approved the draft subject to an error being corrected, but stated that the contract remained conditional until the executed licence was received. No executed licence was entered into. The county court held that the landlords had not granted a licence to assign. Mr Mahmood sought permission to appeal.

1. Permission refused. The county court’s conclusion was correct and there was no real prospect of success.
2. The issue was whether the landlords had in fact given consent to the assignment. A licence to assign need not necessarily take a particular form unless the lease so requires, but the form and effect of the consent depend on construction of the relevant communications and the surrounding circumstances.
3. The landlords’ correspondence did not give unconditional consent. It indicated that consent would be provided on the basis that Mr Lola, the proposed assignee, signed the licence. The licence included a guarantee agreement and was intended to create binding obligations between the landlords and Mr Lola.
4. Although Mr Lola’s solicitors approved the draft, the document was not binding because it had not been signed and no contractual relationship had otherwise arisen between Mr Lola and the landlords. The condition imposed by the landlords had therefore not been satisfied.
5. The draft licence could not constitute the licence required by the sale conditions. Special condition 10 required the licence to have been received before the money was released, while special condition 11 made the transaction conditional upon receipt of the licence within the specified period.
6. The decision in Prudential Assurance Co Ltd v Mount Eden Land Ltd [1997] 1 EGLR 37 was distinguishable. In that case, the landlord’s conditions had been accepted and the formal licence was a bare formality, creating a binding agreement between the relevant parties. Here, no binding agreement existed between the landlords and Mr Lola.

Order: applications for permission to appeal refused.

• Worcester County Court: His Honour Judge McKenna held that the landlords had not given a licence to assign the lease.
• Court of Appeal (Civil Division): Permission to appeal was refused. The county court’s judgment was held to be correct.