Absolute vs Qualified Alienation Covenants
Absolute covenant: no assignment, subletting, or sharing permitted; no right to seek consent; breach = potential forfeiture; uncommon in institutional leases. Qualified covenant: no dealing without landlord's prior written consent; LTA 1988 applies; consent must not be unreasonably withheld; landlord must give written decision with reasons. Fully qualified covenant: expressly states consent 'not to be unreasonably withheld or delayed' — LTA 1988 also applies; both contractual and statutory tenant protection. LTA 1927 s.19(1): pre-1988 Act leases — implied proviso that consent must not be unreasonably withheld where covenant is qualified. Absolute subletting with qualified assignment: some leases permit assignment (with consent) but prohibit subletting absolutely.
Landlord and Tenant Act 1988 — Statutory Duties
Four statutory duties where alienation covenant is qualified: (1) written notice of decision within reasonable time (typically 4–8 weeks for standard application); (2) give consent unless reasonable grounds for refusal; (3) written reasons if refusing (oral/informal refusal insufficient); (4) conditions must not be unreasonable. Time runs from receipt of application by landlord/agent — together with any supporting information reasonably needed. LTA 1988 s.4 damages: tenant can claim damages for breach of landlord's duties — including loss of the proposed deal, abortive costs, and consequential losses.
Reasonable Grounds for Refusing Consent
Ashworth Frazer v Gloucester CC [2001] UKHL 59: HL confirmed objective test for reasonableness; assessed at date of refusal; post-refusal events do not save unreasonable decision; landlord bears burden. Accepted grounds: financial covenant weakness of incoming tenant (insufficient net assets/trading history); proposed use in breach of user covenant; material structural changes without adequate protections; maintaining character of building or development (but must be applied consistently). Test: would a reasonable person in landlord's position have refused on those grounds, knowing what the landlord knew at date of refusal?
Conditions on Consent
AGA condition: requiring outgoing tenant to enter into AGA — generally accepted as reasonable condition under new leases. Rent deposit or additional security: reasonable where incoming tenant's covenant strength uncertain or lease for substantial term. Direct covenant: incoming tenant covenants directly with landlord to observe/perform lease covenants — standard and reasonable. Unreasonable conditions: conditions designed to extract premium or additional payment from incoming tenant; conditions restricting incoming tenant's use beyond existing user covenant — likely unreasonable under LTA 1988.
Sharing Occupation and Group Companies
Group company sharing: most commercial leases permit sharing with group companies (CA 2006 s.1159 — holding company/subsidiary relationships) without formal consent — provided no legal demise (sublease) is created; must be a licence to occupy. Non-group sharing: requires landlord's written consent unless expressly permitted. Creating a legal demise: formal sublease to group company requires consent even for group arrangements. Scotland: LTA 1988 applies only in England and Wales; Scottish commercial leases governed by Scots law; consent requirements and remedies differ; take specialist Scottish legal advice.