E.ON UK Plc v Gilesports Ltd

A sublease may incorporate the headlease’s tenant covenants mutatis mutandis, imposing corresponding obligations on the subtenant. A statutory duty to decide a consent application within a reasonable time is not engaged unless the application has been served using the prescribed method. Reasonable time depends on all the circumstances, including the landlord’s need for advice, holidays, communicated urgency, transaction complexity and the parties’ conduct. An unregistered transfer may become void as to the legal estate, which then reverts to the transferor. The former-tenant protection does not apply while that person is again the current tenant.

E.ON UK Plc, as assignee of the headlease and related cause of action, sought declarations that Gilesports Ltd remained tenant of a retail unit under a sublease and claimed rent arrears, alternatively damages.

Gilesports had transferred the sublease to another group company without first obtaining the head landlord’s consent. The proposed assignee later failed to register the transfer. The issues concerned construction of the sublease, the alleged statutory duty to consent within a reasonable time, the effect of non-registration, and the application of the former-tenant rent provisions.

1. The sublease required the head landlord’s consent to the transfer. The words requiring observance of the headlease covenants, so far as consistent with the sublease and read mutatis mutandis, imposed corresponding obligations on the subtenant.
2. The statutory duty under section 1(3) of the Landlord and Tenant Act 1988 was not engaged because the application had not been served in one of the methods incorporated by the sublease. Section 196 of the Law of Property Act 1925 required delivery to the landlord’s last-known place of abode or business or service by registered post. Receipt by the landlord’s agent of an email was insufficient. There was no estoppel by convention.
3. Alternatively, a reasonable time had not expired when the transfer was executed. Eleven working days was insufficient given the need for advice and internal consideration, the holiday period, the absence of communicated urgency or a deadline, the financial position of the proposed assignee and guarantor, and the proposed change of use. The transfer was therefore in breach of covenant.
4. Failure to register the transfer made it void as to the legal estate, which reverted by operation of law to Gilesports. Gilesports then became bound by the tenant covenants under section 3(2)(a) of the Landlord and Tenant (Covenants) Act 1995, even on the assumption that the transfer had not breached the covenant.
5. Section 17 of the 1995 Act did not limit Gilesports’ liability because, following reversion of the legal estate, Gilesports was the current tenant rather than a former tenant. Judgment was accordingly given for the claimant.