Agreements conditional on superior landlord's consent

Agreements conditional on superior landlord's consent

Published:

Author: Jessica Ready

The decision in Rail Safety and Standards Board Ltd v British Telecommunications Ltd [2012] is an important one when considering superior landlord's consent

The case illustrates that parties entering into an agreement conditional on superior landlord's consent must ensure that the agreement clearly reflects their intentions as to when the condition will be deemed to have been satisfied.

BT entered into an agreement to underlet part of its premises to RSSB. The agreement was conditional on obtaining the superior landlord's consent, which was to be by way of a prescribed form of licence attached to the agreement.

The licence was signed by all of the parties and the superior landlord confirmed it held the executed licence and would be in a position to complete as soon as its costs were paid. BT requested the costs from RSSB, but RSSB served notice to terminate the agreement on the basis that the longstop date had passed and the condition had not been satisfied.

BT refused to accept the validity of that notice arguing that the superior landlord's consent had already been granted, consent in principle being sufficient. BT served a notice to complete, RSSB failed to complete - on the grounds that it had already lawfully terminated the agreement. BT started proceedings for damages.

The Court of Appeal decided that until the licence was completed RSSB was entitled to terminate the agreement. The agreement clearly and unambiguously provided that the consent was to be in the prescribed form of licence attached to the agreement. On the basis the signed licence had been retained, undated, by the superior landlord's solicitor, and not delivered, consent had not been given.

When negotiating an agreement for lease it is important to ensure that the wording of the agreement achieves the parties' commercial objectives. In this case, if BT wanted RSSB to be bound to complete before the licence was formally granted then it would have been better advised not to make the agreement conditional on the form of licence attached to the agreement for lease.

Despite this decision it remains possible that if an agreement is not clear as to what constitutes written consent a landlord's consent might be deemed to have been given even if it has not actually given that consent formally.