Reiner & Anor v Triplark Ltd

A covenant requiring consent to assignment or parting with possession concerns legal possession, not mere occupation. The question is fact-sensitive, but the hallmark is the right to exclude others. A seller who completes a sale with vacant possession, gives up physical control and keys, and holds the lease only as bare trustee for the buyer has parted with possession even before registration.

Where a right-to-manage company must give the landlord 30 days’ notice before granting approval, that statutory prohibition prevails. Until notice is given, the company cannot be under the positive duty to consent, and its failure to respond is not an unreasonable withholding of consent. The tenant’s remedy is to enforce the notice obligation.

Ms Reiner contracted to sell her long leasehold flat to Mr Wismayer. The right-to-manage company held responsibility for approving an assignment or parting with possession, but deliberately failed to give the landlord the required 30 days’ notice. Completion occurred, with payment, vacant possession and delivery of the keys, although the transfer remained unregistered.

The First-tier Tribunal and, on rehearing, the Upper Tribunal (Lands Chamber) in LRX/49/2016 held that Ms Reiner had parted with possession in breach of the lease covenant. The appeal concerned whether that conclusion was possible before registration and whether the right-to-manage company’s failure to respond amounted to unreasonable withholding of consent under the Landlord and Tenant Act 1988.

The Court of Appeal unanimously dismissed the appeal. The lead judgment was given by Lord Justice David Richards and agreed by Lord Justice Holroyde and Lady Justice Arden.

1. Parting with possession. The covenant concerned legal possession rather than mere occupation. Applying Lee Kee Ying v Lam Shes Tong [1975] AC 247, Akici v LR Butlin Ltd [2005] EWCA Civ 1296 and Clarence House Ltd v National Westminster Bank plc [2009] EWCA Civ 1311, the relevant inquiry was factual. Legal possession involves physical custody and control, an intention to exercise them for one’s own benefit, and the right to exclude others.
2. Ms Reiner had comprehensively surrendered physical possession and control by removing her belongings and handing over the keys. Completion also ceded her legal right to possession. Although she remained the registered lessee pending registration, she held the lease as bare trustee for Mr Wismayer and had to exercise her remaining legal rights in accordance with his directions. She had therefore parted with possession. The distinction between parting with possession and assignment or subletting was supported by Horsey Estate Ltd v Steiger [1899] QB 79.
3. Statutory consent regime. Under the Commonhold and Leasehold Reform Act 2002, the right-to-manage company assumed the landlord’s approval function, but section 98(4) prohibited it from granting approval for parting with possession until it had given the landlord 30 days’ notice. Read with the modified Landlord and Tenant Act 1988, the positive duty to consent could not arise before that prohibition ended. The company’s failure to respond was consequently not an unreasonable withholding of consent. The reasoning in Norwich Union Life Insurance Society v Shopmore Ltd [1999] 1 WLR 531 was read subject to that statutory prohibition.
4. The alternative factual ground relied on by the Upper Tribunal was unsustainable. An uninformed lessee was not disqualified from alleging unreasonable withholding merely because the sale contract placed responsibility for obtaining consent on the buyer. The court also noted that an interested lessee could seek an order under section 107 of the 2002 Act requiring the right-to-manage company to remedy its failure to give notice.

1. Court of Appeal (Civil Division) In [2018] EWCA Civ 2151, the appeal was dismissed.
2. Upper Tribunal (Lands Chamber) In LRX/49/2016, on rehearing, the tribunal upheld the finding that Ms Reiner had parted with possession in breach of the lease covenant.
3. First-tier Tribunal The tribunal had held that Ms Reiner parted with possession of the flat in breach of the covenant.