The Leasing Hotline

Landlord's Consent for a Sublease Unreasonably Withheld

Where a landlord withholds consent for a sublease, the landlord must demonstrate that the withholding was not unreasonable. Buck Consultants, Inc. v. Glenpointe Associates v. Mellon Financial Corporation, No. 05-4685, U.S. Court of Appeals for the Third Circuit, Feb. 9, 2007.

The landlord leased space to PricewaterhouseCoopers, which as-signed the lease to Buck. Under the terms of the lease, Buck was not permitted to assign or sublease the space without the consent of the landlord, but the lease required that such consent may not be unreasonably withheld. Meanwhile, the landlord entered into a separate lease with another tenant, Eisai. After leasing its initial space, Eisai sought to lease more space from the landlord. However, when Eisai did not like the terms of the offer of the additional space, Eisai began to negotiate with Buck to sublease its space. Upon learning of the negotiations between Eisai and Buck, the landlord attempted to make additional proposals to Eisai, which were rejected by Eisai. Eisai and Buck eventually agreed on terms of a sublease. However, the landlord provided Buck with a written notice of its refusal to consent to the sublease.

Buck demanded that the landlord reverse its position, but the landlord refused, explaining that the expiration date of the subleases would result in large vacancies. It further explained that the timing of the expiration would result in the landlord and tenant becoming direct competitors to fill the leases at the end of their terms. As a result of the landlord's failure to consent, the sublease between Buck and Eisai fell apart, and Buck ceased paying rent to the landlord on the space it would have leased to Eisai. Buck commenced an action for breach of contract, breach of duty of good faith and fair dealing, and tortious interference with a contract. The landlord counterclaimed for unpaid rent and expenses.

The district court granted summary judgment in favor of Buck as to breach of contract and breach of duty of good faith and fair dealing. The district court granted summary judgment in favor of the landlord on Buck's claim for tortious interference. On appeal, the appellate court held that the landlord's withholding of consent was unreasonable because its rationale for withholding was solely economic in nature. The landlord was unable to demonstrate that its operation of the building was endangered by Buck's proposed sublease with Eisai. However, Buck was unable to demonstrate that the landlord acted in bad faith because the record did not show that the landlord acted with the objective of preventing Buck from receiving its 'reasonable expected fruits under the contract.'

Landlord's Consent for a Sublease Unreasonably Withheld

Where a landlord withholds consent for a sublease, the landlord must demonstrate that the withholding was not unreasonable. Buck Consultants, Inc. v. Glenpointe Associates v. Mellon Financial Corporation, No. 05-4685, U.S. Court of Appeals for the Third Circuit, Feb. 9, 2007.

The landlord leased space to PricewaterhouseCoopers, which as-signed the lease to Buck. Under the terms of the lease, Buck was not permitted to assign or sublease the space without the consent of the landlord, but the lease required that such consent may not be unreasonably withheld. Meanwhile, the landlord entered into a separate lease with another tenant, Eisai. After leasing its initial space, Eisai sought to lease more space from the landlord. However, when Eisai did not like the terms of the offer of the additional space, Eisai began to negotiate with Buck to sublease its space. Upon learning of the negotiations between Eisai and Buck, the landlord attempted to make additional proposals to Eisai, which were rejected by Eisai. Eisai and Buck eventually agreed on terms of a sublease. However, the landlord provided Buck with a written notice of its refusal to consent to the sublease.

Buck demanded that the landlord reverse its position, but the landlord refused, explaining that the expiration date of the subleases would result in large vacancies. It further explained that the timing of the expiration would result in the landlord and tenant becoming direct competitors to fill the leases at the end of their terms. As a result of the landlord's failure to consent, the sublease between Buck and Eisai fell apart, and Buck ceased paying rent to the landlord on the space it would have leased to Eisai. Buck commenced an action for breach of contract, breach of duty of good faith and fair dealing, and tortious interference with a contract. The landlord counterclaimed for unpaid rent and expenses.

The district court granted summary judgment in favor of Buck as to breach of contract and breach of duty of good faith and fair dealing. The district court granted summary judgment in favor of the landlord on Buck's claim for tortious interference. On appeal, the appellate court held that the landlord's withholding of consent was unreasonable because its rationale for withholding was solely economic in nature. The landlord was unable to demonstrate that its operation of the building was endangered by Buck's proposed sublease with Eisai. However, Buck was unable to demonstrate that the landlord acted in bad faith because the record did not show that the landlord acted with the objective of preventing Buck from receiving its 'reasonable expected fruits under the contract.'