Commercial First Business Ltd v Atkins [2012]

Mortgage lender withholding consent to let?

The High Court case of Commercial First Business Ltd v Atkins [2012] held that a mortgage lender is only entitled to withhold consent to a letting of a property if it is acting reasonably.  This applies to commercial investment property as well as residential property with a buy-to-let mortgage.

Most lenders prohibit letting without their consent mainly to protect the lender’s security and ensure that the property is not burdened with a lease on unsatisfactory terms, such as at a low rent.

The case highlighted that a lender must consider certain factors when deciding whether it can withhold consent.  These are as follows:-

  • A lender should not refuse consent to a letting which has nothing to do with the relationship of the lender and borrower in relation to the mortgaged security and proposed letting.
  • a lender can refuse to give its consent to a letting for reasons not contained in the mortgage documentation disclosed to the borrower the time the mortgage was taken out, subject to the reasons not being unreasonable.
  • There may be exceptional cases where the lender may need to consider whether the detriment to the borrower is disproportionate to the benefit of the lender if consent is withheld.
  • The lender does not need to show that refusing consent was justified as long as its decision might have been reached by a reasonable lender in the circumstances.
  • In each case it is a question of fact however the onus is on the borrower to prove that consent has been unreasonably withheld.

Sabrina Umrani (Solicitor)
Healthcare and Company Commercial Teams 

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInPrint this pageEmail this to someone