ALI-ABA Course of Study Modern Real Estate Transactions July 25 ...

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rent) 7 ; Chanslor-Western Oil & Development Co. v. Metropolitan Sanitary
District, 131 Ill. App. 2d 527, 266 N.E.2d 405 (1970) (holding that the
district acted unreasonably in conditioning consent to sublease on
reappraisal of rent); 1010 Potomac Assoc. v. Grocery Manufacturers, 485
A.2d 199 (D.C. App. 1984) (holding that Landlord acted unreasonably in
withholding consent to a sublease of an option period solely to extract
additional rent) 8 ; Economy Rentals, Inc. v. Garcia, 112 N.M. 748, 819
P.2d 1306 (1991).
3. Type III Restrictions: Prohibition Without Landlord’s Consent. This type
of clause omits an express requirement that the Landlord be reasonable in
withholding its consent. When a lease contains this type of restriction and
a Landlord has asked for a fee or increased rental as a condition to its
consent to an assignment or sublease, the court must first decide whether it
will impose an implied covenant of good faith or reasonableness on the
Landlord. In general, courts from jurisdictions that cling to the majority
rule allowing refusal of consent do not prohibit the Landlord from
conditioning his consent to an assignment or sublease on an increased
rental. Courts from jurisdictions imposing the reasonableness standard,
however, generally hold that such conditional consent is forbidden.
i. Jurisdictions following the "majority" rule. In general, courts
in jurisdictions that have not adopted the implied covenant of
commercial reasonableness will allow the Landlord to condition its
consent on an increased rental or a fee. Courts following the
majority rule generally reason that if the parties wished to
incorporate a standard of reasonableness, they were free to do so
when the lease was drafted. These courts generally refuse to
"rewrite" the clear and unambiguous language of a lease
agreement. See Illinois Central Gulf Railroad Co. v. International
Harvester Co., 368 So. 2d 1009 (La. 1979) (holding that Landlord
could withhold consent for purely economic reasons); B & R Oil
Co. v. Ray’s Mobile Homes, Inc., 422 A.2d 1267 (Vt. 1980).
ii.
Jurisdictions following the "minority " rule. In these
jurisdictions, the court adopted the "minority" position, imposing
7 The court noted that the Landlord failed to provide an adequate reason for denial of the
assignment, particularly since the original Tenant had unequivocally guaranteed performance of
all tenant covenants under the lease, the Landlord did not question the solvency of the proposed
Tenant, no alterations to the premises were necessary in order to convert the same for the
proposed use, and the Landlord did not object to the nature of the proposed Tenant’s use.
8 The Potomac court reasoned that the purpose of a consent provision in any assignment/sublease
clause is to protect the landlord’s ownership and operation of the particular property, not to
protect the landlord’s general economic condition. Relying on the “rule” that the legal remedy of
damages is presumed to be inadequate in disputes involving real property, the court granted the
lessee specific performance.
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