CaseCast™ – "What you need to know"
Brief Fact Summary. The Plaintiffs, Kendall and others (Plaintiffs), wanted to become the assignees of a current interest in land. The Defendant, Ernest Pestana, Inc. (Defendant), withheld consent pursuant to a provision in the lease requiring the corporation’s approval. Plaintiff sued for declaratory relief.
Synopsis of Rule of Law. Lessor must have a reasonable objection to the assignment, even with a provision in the lease stating consent can be withheld for any reason.
Issue. Whether in the absence of a provision that such consent will not be unreasonably withheld, a lessor may unreasonably and arbitrarily withhold his or her consent to an assignment.
Held. Reversed. The Plaintiffs have stated a cause of action. California will require that a consent provision in a lease be read as requiring a reasonable objection to the assignment to withhold consent.
The law generally favors free alienability of property, but contractual restrictions on alienability of leasehold interests are permitted.
California will adhere to the minority rule, that when a lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignment.
A state statute prohibits conditions restraining alienation, which has been interpreted by the courts to prohibit unreasonable restraints on alienation.
Denying consent solely on the basis of personal taste, convenience or sensibility or in order that the landlord may charge a higher rent than originally contracted for have been held arbitrary reasons failing the tests of good faith and reasonableness under commercial leases.View Full Point of Law