By her underlease the tenant covenanted not to assign, sublet or part with possession of the whole of her flat in a block without the previous written consent of the landlord, such consent not to be unreasonably withheld. The tenant put her flat on the market and contacted the block’s right to manage company (“the RTM company”) for consent to the assignment of the lease whereupon the second respondent, who at the material time was the sole director of the RTM company, expressed an interest in buying the flat. Contrary to section 98(4) of the Commonhold and Leasehold Reform Act 2002, which provided that responsibility for giving or withholding consent to the assignment of the underlease was vested in the RTM company which was not permitted to give consent without first giving 30 days’ notice to the landlord, the RTM company failed to give notice to the landlord, the applicant in the present case. The sale of the flat between the tenant and the buyer completed and the transfer was executed but as it was yet to be registered the tenant remained the registered proprietor of the leasehold interest. The tenant removed all her belongings from the flat and delivered the keys to the buyer. The landlord applied to the Land Registry for registration of a restriction to prevent registration of the transfer to the buyer. On the landlord’s application under section 168(4) of the Commonhold and Leasehold Reform Act 2002, the First-tier Tribunal determined that the tenant had breached the covenant as she had parted with possession of the flat to the buyer without obtaining the previous written consent of the landlord. The Upper Tribunal upheld that decision. On appeal the respondents contended that (i) the tenant had not parted with legal possession of the flat for the purposes of the covenant as the transfer had not been registered and until it was she remained the tenant and remained in law entitled to the rights and obligations created by the underlease and (ii) if she had parted with possession, the RTM company’s failure to react within a reasonable time to her consent application was a breach of its duty under section 2 of the Landlord and Tenant Act 1988, read with the 2002 Act, and therefore constituted a deemed unreasonable withholding of consent such that the tenant was entitled to proceed with the assignment and with giving possession to the buyer.
On the respondents’ appeal—
Held, appeal dismissed. (1) A sufficient degree of physical custody and control and an intention to exercise such custody and control on one’s own behalf and for one’s own benefit were necessary for legal possession. Whether a person had parted with possession was to be determined on an examination of the facts of the particular case and the arrangements between the tenant and the person to whom it was said that possession had been given. In the present case, the tenant had parted with legal possession of the flat to the buyer on completion of the sale, she had comprehensively given up physical possession and control of the flat to him by removing all her belongings, delivering the keys to him and had ceded all legal right to possession by completing the contract to assign her interest, with the flat being expressly sold with vacant possession. While the transfer had yet to be registered and the tenant remained in law the lessee, the assignment was complete in equity and as bare trustee the tenant was required to exercise her legal rights as lessee only in accordance with the buyer’s directions (paras 35–41).
(2) For the purposes of section 1(3) of the 1988 Act, once there were no grounds for reasonably refusing consent, there was a positive statutory duty on an RTM company to give consent. However by section 98(4) of the 2002 Act an RTM company was expressly prohibited from giving consent until 30 days’ notice had been given to the landlord and therefore until such notice had been given an RTM company was not under such a positive duty and there could not be an unreasonable withholding of consent by the RTM company. Accordingly the Upper Tribunal had reached the right conclusion (paras 53, 56, 60–62).
Edwin Johnson QC (instructed by Payne Hicks Beach) for the respondents.
Brie Stevens-Hoare QC and Stan Gallagher (instructed by Hamlins llp) for the landlord