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