Rotrust Nominees Ltd v Hautford Ltd

Where a lease requires consent to a planning application, with consent not to be unreasonably withheld, the tenant must show objectively that the refusal was outside the range of decisions a reasonable landlord might make. The analysis begins with the purpose of the covenant, read with the lease and the circumstances at grant, but reasonableness is assessed when consent is sought. A planning-consent covenant should not be construed as restricting a use expressly authorised by the user covenant, absent clear language. The fact that the proposed use may improve the tenant’s prospects of enfranchisement does not by itself justify refusal. Wider estate-management concerns must be assessed within the statutory scheme, including the protective covenants available under the Leasehold Reform Act 1967.

Hautford held a long lease of a property whose user covenant expressly permitted residential use throughout. A separate covenant required the landlord’s consent, not to be unreasonably withheld, before applying for planning permission. Rotrust refused consent because the proposed residential use might improve Hautford’s prospects of enfranchising and might harm management of the surrounding estate.

The Central London County Court, by an order dated 11 August 2016, declared the refusal unreasonable and held that Hautford could make the planning application. Rotrust appealed. The central issue was whether the refusal was objectively unreasonable in the context of the lease covenants and the Leasehold Reform Act 1967.

Appeal dismissed. The tenant bore the burden of showing that consent had been unreasonably withheld. The test was objective: a landlord was not unreasonable if the decision was one which a reasonable landlord might have reached in the circumstances, even though other landlords might have decided differently.

1. The facts were critical. Limited differences in the factual context could be decisive, so authorities concerning superficially similar consent disputes were not automatically determinative.
2. The starting point was the purpose of the covenant intended by the original parties, construed in the context of the lease as a whole and the circumstances in which it was made. Reasonableness was assessed at the time of the application.
3. Clause 3(11) expressly authorised residential use of the entire property and contained no requirement for the landlord’s consent to residential use. Construing clause 3(19) as permitting the landlord to prevent residential use in order to obstruct enfranchisement would rewrite clause 3(11), produce an impractical result, and contradict the apparent intention of the parties. The possible enhancement of Hautford’s enfranchisement prospects therefore did not justify refusal.
4. [1977] 1 QB 506 (CA), [1977] 1 QB 517, (1975) 29 P&CR 102, [1979] 1 QB 593 and [2013] EWCA Civ 480 were materially distinguishable because of their different lease, statutory or factual contexts, particularly leases granted before enfranchisement legislation. The former normal and abnormal assignment approach had also been disapproved. The decision in [2004] EWCA Civ 592 was fact-specific.
5. Wider management interests could not provide an independent justification once the proper purpose of clause 3(19) had been identified. In any event, section 10(4) of the Leasehold Reform Act 1967 provided a statutory mechanism for restrictive covenants on transfer, sufficiently protecting the landlord’s wider interests on the facts.

The County Court declaration was upheld. In an obiter postscript, the Master of the Rolls stated that judgments on applications for permission to appeal which did not comply with the Practice Direction on citation of authorities should not ordinarily be cited.

• Court of Appeal (Civil Division): On 17 April 2018 dismissed Rotrust’s appeal.
• Central London County Court: On 11 August 2016 HHJ Collender QC declared that consent had been unreasonably withheld and that Hautford could make the planning application notwithstanding the refusal.