Owner Must Exercise Right to Consent to Lease Assignment in Good Faith

Facts: A lease agreement said that the tenant couldn't assign or transfer the lease without “the prior written consent of [the owner].” It gave the owner the right to terminate the lease if the tenant assigned the lease without the owner's consent. The tenant assigned the lease without getting this consent. The owner sued to regain possession of the leased property, and the trial court granted the request. The tenant and assignee appealed.

Decision: A Florida appeals court reversed the trial court's ruling and sent the case back to the trial court for further proceedings.

Reasoning: The trial court had ruled for the owner because it determined that the lease gave the owner “the unfettered right to deny its consent to the assignment,” but the appeals court disagreed. Although the lease didn't say that there were conditions on the owner's ability to give consent, the appeals court said that the lease contained an “implied covenant of good faith.”

According to the court, this covenant comes into play when a lease's terms don't resolve a dispute, or when a party can make a discretionary decision without being bound by specific standards. The covenant is designed to protect each party's reasonable expectations. The court explained that it would be unreasonable for the owner to arbitrarily withhold its consent to a lease assignment, unless the lease clearly gave the owner this right.

• Speedway SuperAmerica, LLC v. Tropic Enters., April 2007.

Lesson Learned: When drafting your assignment clause, remember to include conditions for when you may refuse to give consent to an assignment. Many leases say that the owner can not unreasonably refuse to give consent to an assignment, but even this limitation may not be specific enough. Listing specific instances when you can refuse to give consent should help to limit disputes. And if you want to be able to refuse consent for any reason, make sure your lease clearly says that you have this right.