Sargeant & Anor v Macepark (Whittlebury) Ltd.

In deciding whether consent to alterations has been unreasonably withheld, the court must consider whether the landlord’s concern relates to the landlord-and-tenant relationship and the subject matter of the lease. A landlord may, in an appropriate case, consider the effect of the proposed use on trading interests connected with adjoining or neighbouring property. The question remains one of fact and reasonableness. A landlord may impose a condition protecting a legitimate concern, but the condition must be proportionate and no wider than necessary. A landlord may protect an existing wedding or functions business, but cannot use the consent mechanism to reclaim commercial opportunities already within the tenant’s permitted use. An absolute restriction limited to management-training conferences was unreasonable because it excluded other existing business activities.

The claimants owned land adjoining premises leased to the defendant for a hotel, conference centre, management-training centre and leisure complex. The lease prohibited alterations without the landlords’ consent, such consent not to be unreasonably withheld or delayed.

The defendant sought consent to construct an extension containing bedrooms, syndicate rooms, training rooms and a large conference hall. The claimants offered consent subject to a condition restricting the non-bedroom rooms to functions and activities directly related or connected to management-training conferences. The parties agreed the other licence terms and asked the court to determine whether that condition was reasonable.

1. Discretion to determine the issue. Although the proceedings had substantially settled, the court retained a cautious discretion to decide the outstanding substantive issue because it had been raised on the pleadings.
2. Applicable principles. The reasonableness of withholding consent or imposing a condition depended on the common law and Landlord and Tenant Act 1927, section 19(2). The tenant bore the burden of showing unreasonableness. The landlord did not need to establish that its conclusion was right or objectively justified; it was enough that the conclusion might reasonably be reached in the circumstances.
3. A landlord was not confined to concerns about the physical works. In an appropriate case, the proposed use of the altered premises could be relevant. There was no rule excluding reasonable concerns about competition with the landlord’s trading interests in adjoining or neighbouring property. Whether such a concern justified refusal or a condition was a question of fact.
4. The statutory protection against withholding consent for pecuniary damage did not confine the landlord to seeking compensation where the concern arose from the proposed use and affected legitimate property interests. A condition could reasonably neutralise a concern which would itself justify refusal, subject to proportionality.
5. The claimants could legitimately protect their established wedding and functions business, including concerns arising from the defendant’s ability to accommodate larger weddings in the extension. They could not rely on competition concerning management training or conferences, which formed part of the defendant’s existing permitted business and were protected by the lease.
6. The proposed condition was too wide. It imposed an absolute restriction permitting only management-training conferences and excluded other existing business activities, including product launches, award ceremonies and exhibitions. It therefore went beyond reasonable protection of the claimants’ legitimate concerns. The lease was not varied to include the condition.