Owner Can't Escape Good-Faith Duty When Responding to Consent Request

A lease's assignment clause stated that the tenant could not assign the lease without the owner's prior consent. Any assignment made without the owner's consent would be void. The tenant requested the owner's consent to an assignment, but the owner denied consent. Despite this, the tenant assigned its lease to the assignee, and sued the owner for denying consent. The owner asked the court to dismiss the lawsuit, arguing that the lease gave it an “unfettered” right to deny consent to assignments.

A Florida appeals court refused to dismiss the lawsuit. The court noted that the lease's assignment clause contained no standards for exercising discretion by the owner, nor did the clause give the owner an unfettered right to deny consent to assignments. Rather, the clause created a circumstance where “one party has the power to make a discretionary decision without defined standards,” said the court. Thus, the court reasoned that there must be an implied duty that the owner act in good faith when deciding whether to approve or deny an assignment, to protect the parties' reasonable commercial expectations.

The owner could not deny consent based on arbitrary reasons such as personal taste, convenience, and to charge a higher rent. The court ordered further proceedings to find out if the owner violated the implied duty.

• Speedway Superamerica, LLC v. Tropic Enterprises, Inc.: Nos. 2D05-2207, 2D05-2209, 2007 Fla. App. LEXIS 5799 (Fla. Ct. App. 4/20/07).

Sidebar

Lesson Learned: Even if your assignment clause doesn't require you to be reasonable or provide standards to follow when deciding to accept or deny tenants' requests for an assignment or a sublet, you may have an implied duty to act in good faith when responding to such requests. Check with your attorney to see if your state recognizes this implied duty.