Since the Court of Appeal’s decision in K/S Victoria Street v House of Fraser (Stores Management) Ltd [2011] EWCA Civ 904, concerns have existed over those post-1995 Act leases (and there are many) in respect of which a group assignment clause had been included to provide an element of freedom to assign the lease within the original tenant’s group of companies, provided the parent body guarantor of the original tenant committed to a repeated parent body guarantee in respect of all assignees within the group.
In the House of Fraser case, the Court of Appeal had confirmed that where, in relation to a post-1995 Act tenancy, a tenant’s guarantor agreed to provide a guarantee of the tenant’s immediate assignee (i.e. a “repeat” guarantee), that agreement was rendered void by the anti-avoidance provisions of the 1995 Act (section 25 LTCA 1995) as it had the effect of frustrating the tenant’s guarantor’s release from liability on a lawful assignment of the lease under section 24(2) LTCA 1995. Since, as a result of the House of Fraser case, such repeat guarantees will be void, where would that leave the parties to a lease which included such a provision?
In Tindall Cobham 1 Ltd v Adda Hotels [2014] EWCA Civ 1215, the tenant’s lease stated that:
“The Tenant shall not assign this Lease to any Associated Company of the Tenant without the prior consent of the Landlord Provided Always that … the Landlord shall be entitled to impose any or all of the following conditions set out in sub clauses (a) and (b) below:
(a) that the Tenant shall provide the Landlord with notice of any such assignment within 10 Working Days of completion of the same;
(b) that on any such assignment, the Tenant shall procure that the Guarantor and any other guarantor of the Tenant shall covenant by deed with the Landlord in the terms set out in the Sixth Schedule at the Tenant’s sole cost;
and subject to the Tenant’s compliance with such conditions the Landlords consent shall be given.”
The Court of Appeal ruled that, applying the House of Fraser case and section 25 LTCA 1995, the proviso (i.e. the words from “Provided Always” to the end) were rendered void, thereby leaving the covenant as a simple qualified covenant against assigning to associated companies without the prior consent of the landlord. Therefore, applying section 19(1)(a) of the Landlord and Tenant Act 1927, the landlord will be able to withhold its consent, but may not do so unreasonably.