The process of seeking a landlord's consent can be an expensive process for the tenants of any commercial premises.
Money, money, money. Must be funny… Right? Wrong. The process of seeking a landlord’s consent for anything won’t feel funny in the slightest, given the likelihood that it will cost tenants what feels like a significant amount of money when compared with what undoubtedly feels like a relatively minor request.
What does a tenant need consent for?
Typically, a tenant requires consent from their landlord if they wish to assign their lease to another tenant. This also applies when changing the use or naming alterations to its premises. This is because the landlord will want to keep control over such matters to safeguard interest in the property.
A modern commercial lease will provide that the tenant is responsible for paying the landlord’s costs of giving such consent and, in addition, the tenant will have to pay their own solicitor’s fees for obtaining it.
What are the costs?
Landlords’ costs for consent vary widely but, on average, are usually about £1,000 plus VAT with legal firms in London sometimes charging over twice that amount. If these costs are challenged then the stock answer is that they must be reasonable because they are the firm’s standard charge, as if one automatically followed the other!
Further attempts to get landlords’ solicitors to justify their costs are likely to be met with the response that their fees will not be reduced and any further correspondence on the matter will only result in the costs being increased.
So, for landlords is that the name of the game?
Is a tenant able to negotiate or does the winner really take it all?
Well, a possible answer is provided by paragraph 1.2 of the 2019 Solicitors Regulation Authority Code of Conduct (for Solicitors, RELs and RFLs), which requires solicitors not to abuse their position by taking unfair advantage of clients or “others” which would include a tenant applying for consent. Costs must be reasonable, and solicitors should give a breakdown of their charges upon request.
A landlord’s solicitor should also consider whether it is wise to refuse to take any further steps in the matter simply because they have not received the undertaking as this could amount to an unreasonable delaying of consent.
But, if the landlord’s solicitor insists that their costs are fair when challenged, a tenant’s only remedy would be to apply to the Court for an assessment of the costs. Depending on the sums involved, the financial implications may make this impractical.
Challenging the reasonableness of costs is always a difficult task for a tenant. There is no guarantee that quoting the SRA Code to the landlord’s solicitors will reduce their costs, but it is a reasonable avenue to pursue if all else fails.