Transfers Requiring Consent – What is Reasonable? Unreasonable?

Landlords rightfully want and need some control over their tenant mix in terms of permitted uses as well as the actual tenants. Typically this is done through the use and transfer provisions in a Lease. In the latter tenant transfers are not permitted as of right, (other than in certain limited and negotiated circumstances which are dependant on the leverage of the tenant and even then certain pre-conditions usually apply) at the tenant’s own volition but are rather subject to landlord consent being obtained.

Virtually all landlord lease forms contain transfer clauses designed to control a tenant’s right to transfer its interest in the lease. Invariably, that clause gives the tenant a transfer right but with the very common added qualification: “subject to the Landlord’s consent, not to be unreasonably withheld”.

Where a lease provides for landlord consent without the qualification noted, subsection 23(1) of the Commercial Tenancies Act, Ontario provides that unless a lease contains an express provision to the contrary [i.e. it says the landlord can be unreasonable], the lease will be deemed to include a clause prohibiting the landlord’s consent from being unreasonably withheld.

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