21 Merchants Row Corp. v. Merchants Row, Inc

Citation. 22 Ill.412 Mass. 204, 587 N.E.2d 788 (1992)

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Citation22 Ill.412 Mass. 204, 587 N.E.2d 788 (1992)

Brief Fact Summary. This case arises by Plaintiff lessee suing Defendant lessor for damages arising from the lessor’s refusal to give consent to an assignment.

Synopsis of Rule of Law. A landlord is under no obligation to act reasonably in withholding consent to a tenant wishing to assign a lease.

Points of Law - Legal Principles in this Case for Law Students.

We noted there that a majority of jurisdictions subscribe to the rule that a lease provision requiring the landlord's consent to an assignment or sublease permits the landlord to refuse arbitrarily or unreasonably.

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Facts. Plaintiff lessee entered into a lease with Defendant’s predecessor in title in 1974, wherein the lease provided that the lessee had no right to assign the lease without the express written consent of the lessor. Then Defendant acquired the premises in 1983, and the Plaintiff and Defendant did not get along very well. In 1987 Plaintiff entered into a purchase agreement for the sale of its business. In April 1988, after litigation, the Defendant consented in writing to an assignment of the lease to the Plaintiff’s buyer. Thereafter, Plaintiff and buyer asked the Defendant to give written consent of an assignment by buyer to buyer’s bank for finance. The bank’s assignment required the bank to have an absolute right of reassignment without the landlord’s consent. The Defendant landlord refused to sign the bank’s assignment form and the Plaintiff sued, alleging that the Defendant unreasonably withheld his consent to the reassignment to the bank. At trial the Plaintiff won; the Defe
ndant then appealed.

Issue. Must the landlord act reasonably in withholding consent to assignment when the commercial lease gives the landlord the right to refuse such consent?

Held. No. Judgment reversed.
The Court cites prior decisions which state that no requirement of reasonableness will be implied in the lease contract which would require the landlord to act reasonably in refusing consent to an assignment.
The Court, because there is no rational distinction between commercial tenants and residential tenants, refused to grant more protection to the commercial tenant under the law than to the residential tenants.
Because the bargaining power of a commercial tenant is usually greater than that of a residential tenant, this Court held that, logically, if any group were to be favored it would be the residential tenant.

Discussion. The Court does not require any proof of motive to rule in this case. In other situations, the courts do require proof of motive. Consider why different situations are treated differentl

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