A commercial landlord and a tenant enter into a five-year lease agreement. The lease contains a clause stating, "Tenant shall not assign or sublet the premises without the prior written consent of the Landlord, which consent shall not be unreasonably withheld." The tenant later seeks to assign the lease to a new tenant with an excellent credit history and a business plan identical to the original tenant's. The landlord refuses consent, stating they simply prefer not to deal with new tenants. Under the modern view of such clauses, what is the most likely outcome?
- AThe landlord's refusal is valid because the landlord has an absolute right to control who occupies their property.
- BThe landlord's refusal is unreasonable and constitutes a breach of the lease, allowing the tenant to assign the lease despite the refusal.
- CThe tenant can assign the lease, but the original tenant remains primarily liable for rent due to the assignment.
- DThe landlord's refusal is valid because the clause only requires 'written consent', not a reason for withholding it.
Show answer & explanationAnswer & explanation
Correct answer: B. The landlord's refusal is unreasonable and constitutes a breach of the lease, allowing the tenant to assign the lease despite the refusal.
Under the modern view, a clause requiring landlord consent not to be unreasonably withheld implies that the landlord has a duty to act in good faith and with commercial reasonableness. Refusing consent solely based on a general preference not to deal with new tenants, when the proposed assignee is financially sound and suitable, is generally considered unreasonable.
Why the other options are wrong
- A. This is the traditional view, but the clause 'which consent shall not be unreasonably withheld' modifies this absolute right.
- C. While the original tenant generally remains secondarily liable unless a novation occurs, the immediate issue is the validity of the landlord's refusal to consent to the assignment, which, if unreasonable, allows the assignment to proceed.
- D. The clause explicitly adds the 'not unreasonably withheld' condition, which implies a standard of reasonableness beyond mere written consent.
Landlord Consent to Assignment/Sublet (Reasonableness Clause)
A lease provision requiring landlord consent for assignment or subletting, but stipulating that consent 'shall not be unreasonably withheld.' Under the modern view, 'unreasonably withheld' requires the landlord to have commercially reasonable grounds for refusal.
- Shifts from traditional absolute landlord discretion.
- Reasons for refusal must relate to the assignee's financial responsibility or suitability for the premises.
- Personal preferences or desire for higher rent are generally not commercially reasonable grounds.
Memory trick: Landlord's Veto: Absolute or Reasonable?