In brief

Last week I had to give advice on whether a landlord could withhold consent to a proposed sublease. The relevant clause in the lease (which was not a retail lease) had detailed provisions concerning an assignment but with respect to subletting, it was only stated that the landlord could not unreasonably withhold consent.

The landlord’s reply to the tenant was that it was considering the matter and would not be able to respond for a number of months.

In my view, this is a breach of the lease by the landlord as it is simply not acceptable that a tenant has to wait several months for an answer.

What you need to know

If a tenant seeks consent to a subletting, there are two steps that need to be followed by the landlord, namely as follows:

  1. Firstly, the relevant lease clause needs to be perused and if subletting is permitted, the landlord must state the circumstances in which consent can be granted or withheld.
  2. Secondly, if consent is to be granted, the terms of that consent need to be properly communicated to the tenant. If consent is to be refused, a landlord should specify the reasons for refusing consent.

Of course, depending on the lease, it may be that the tenant cannot sublet so that is why the first step is important.

Background

Interestingly, the Retail Leases Act 2003 (Vic) does not mandate that the tenant must have the right to sublet. The Act only specifies that consent cannot be withheld for an assignment, if the tenant complies with certain provisions. Accordingly, if it is important that the tenant has the right to sublet, a tenant’s lawyer must insert this right in the lease. The Act will not assist a tenant.

With respect to whether the lease is governed by the Act, regard must be held to the terms of the subletting clause (if any) in the lease. As noted above, a landlord should provide reasons for withholding consent, if consent is to be withheld. The reasons must be plausible as the failure to sublet can result in the tenant having action against the landlord for a breach of lease. Of course, if there is no right to sublet – the landlord can refuse without providing any reasons.

Conclusion

Careful consideration must be given to a tenant’s request to sublet. If there is no right to sublet, then consent can be withheld. If the tenant has a right to sublet, then the terms of the subletting clause will be paramount and if consent cannot be unreasonably withheld, the landlord, if it wishes to withhold consent, must provide appropriate rational reasons.

Appropriate advice should be obtained as to withholding of consent in circumstances where subletting is permitted; failure to provide consent can result in an action against the landlord.