SQE1 sample questions

Question 37

A freeholder (‘the Landlord’) has granted a commercial lease of a property to a tenant.

The lease provides that the property may not be used other than for retail purposes.

The tenant is a bookstore and requests Landlord’s consent to assign the lease to a supermarket. The bookstore is an independent trader that is finding it difficult to pay the rent. The supermarket is operated by a highly profitable national chain.

The Landlord wishes to withhold consent to the assignment because it operates another supermarket opposite the property and is concerned that the assignee will take trade away from its own business.

The relevant wording of the alienation covenant in the lease is as follows:

“The Tenant shall not assign underlet or charge the Property without the prior written consent of the Landlord.”

Can the Landlord lawfully withhold consent to the assignment on the basis of the assignee’s business?

A. Yes, because a supermarket does not qualify as a retail purpose.

B. Yes, because the Landlord does not have to act reasonably in withholding consent.

C. Yes, because competition by the assignee with the Landlord’s business is a ground for reasonably withholding consent.

D. No, because competition by the assignee with the Landlord’s business is not a ground for reasonably withholding consent.

E. No, because the supermarket is in a better financial position than the bookstore and consent cannot be withheld if the assignee provides a stronger covenant.