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Wed 20 Aug 2014

Subject to Licence: 'A lesson for lawyers'

Subject to Licence: 'A lesson for lawyers'

'A lesson for lawers' by James Goff of JPC Law:

Over the last month I have worked on three separate matters where I have received correspondence that reads "subject to licence".

What’s does this actually mean? Does it mean what you think it means?

Lets start with the standard commercial lease.

If a tenant wishes to assign or underlet their Lease or carry out alterations at the property, then the typical standard lease usually contains wording to the effect that the tenant may carry out such assignment, underletting or alterations subject to the landlord’s consent (such consent not be unreasonably withheld). However, in some instances the landlord will be entitled to withhold its consent pursuant to the lease and any conditions which are set out in the lease. In either event, the prudent landlord will normally instruct a solicitor and give clear instructions for any refusal at the outset.

Acting for the landlord, in three separate matters, I have then received an application which reads: ‘subject to licence’.

However, there is case law to suggest if such correspondence between the landlord and tenant or indeed its solicitors reads "subject to licence" that this is a condition of such consent.

For example, if one were to write "such consent is subject to licence" whether it be licence to assign, licence to underlet or licence for alterations, that in principle suggests consent has been granted but it is subject to receiving a formal licence.

The problem here is that the Courts may actually interpret such wording as consent by the landlord, and consequently, if such consent is granted then any subsequent licence which does not appear should not dilute such consent. Indeed consent is either given or not given. It just so happens that a licence may document that consent.

Furthermore, there has been case law where letters or emails which are headed ‘subject to Licence’ are treated and classed as amounting to consent being granted forthwith. It appears that at that moment in time consent is granted pursuant to those words. So whilst a layperson or lawyer may believe they are actually using those words "subject to licence" to prevent such consent being granted, in reality, it’s having a reverse effect.

This being the case, it is prudent to be aware fully as to what the words "subject to licence" actually mean. The prudent lawyer should set out clear wording in its initial correspondence to the other side to confirm that no consent shall be granted unless it is contained and executed as a deed and furthermore that they have no authority to grant consent on behalf of their client nor bind their client by way of any correspondence in this regard.

James Goff is a commercial property solicitor with JPC Law.

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