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Commercial property

"Which consent shall not be unreasonably withheld"

Our Commercial team examines topical issues affecting the Commercial Property market

"Which consent shall not be unreasonably withheld";  these words are often used to indicate how some proposed but as yet uncertain event in the future is to be dealt with.  The difficulty arises where one party feels that the other party has been unreasonable and how do you objectively assess this.  The recent case of Aviva Investors Pensions Limited v. McDonald's Restaurants Limited raised this very point.  The landlords, Aviva, and McDonald's Restaurants Limited who were the tenants had entered into a Lease which included the provision allowing for the construction of a Costa Coffee unit in the car park with the consent of McDonalds such consent not to be unreasonably withheld or delayed.  The Landlords subsequently approached McDonalds for consent.  McDonalds consulted a traffic engineer about the impact the construction of the coffee unit would have on the car park and how it might affect their trading. His view was that the loss of parking spaces would be detrimental to the trade at their restaurant.  On the basis of that expert opinion McDonald declined to consent to the construction of the Costa Coffee unit. The landlords complained that the advice given was flawed and that a reasonable tenant would have allowed the project to proceed. 

Having reviewed all matters the Court took the view that the tenants (McDonalds) gave careful consideration to the landlords' request and instructed advice from a suitable professional.  Having taken that advice that it would be detrimental, it was not unreasonable for them to withhold consent.  The Court made it clear it was not for them to decide whether or not they agreed that the decision of the tenants was the correct one but whether the tenants had acted reasonably. 

Comment: Where there may be clearly conflicting interests, it is important to specify in details the basis on which any decision is to be made.  If in this case the landlords had wanted the tenants to carry out a more rigorous examination, the grounds for withholding consent should have been specified in more detail. It might have been possible to specify that the loss of a specified number of parking spaces would not be a valid ground for withholding consent. 

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