Are you being reasonable? Lessons from E.on UK PLC v Gilesports Limited

The recent case of E.on UK plc v Gilesports Limited [2012] EWHC 2172 (Ch)provides both landlords and tenants with important guidance in relation to the assignment of a lease and is essential reading due to the interesting points arising from the judgment, in particular the understanding of ‘reasonable time’ for a landlord to give consent to an assignment.

The background to the case involved the tenant of a commercial unit wishing to assign its lease to an assignee. The tenant’s lease required consent of the landlord to the proposed assignment, with such consent not to be unreasonably withheld. The tenant sent the landlord an e-mail seeking the necessary consent, but the tenant proceeded with the assignment to the assignee without having first obtained the landlord’s consent. The assignee failed to register the assignment, and later went in to administration. Due to rent arrears accrued, the landlord sought to recover those arrears from tenant.

The case required the court to make a decision on a number of points, particularly whether eleven working days was a ‘reasonable time’ within which a landlord should have provided consent to the assignment. The court then discussed whether, if section 1(3) of the Landlord and Tenant Act 1988 did apply, and the landlord failed to give consent within a reasonable time. The court highlighted a number of factors which included; the bank holiday period, the failure of the solicitors for the tenant to state the matter was urgent or to set a timetable for a response from the landlord in relation to the consent. The court concluded that the landlord’s failure to provide consent within the relevant eleven working days was not unreasonable or, in other words, that the ‘reasonable time’ within which landlord should have given consent was longer than eleven working days.

The issue as to what is ‘reasonable time’ is judged from the landlord’s point of view, and such period is generally measured in weeks rather than days. It is important to establish clear timescale for transactions and to ensure the urgency of a matter is clearly stated in order not to fall foul of the ‘reasonable time’ trap.