When to Withhold Consent to Sublet a Commercial Property
Steve Evans v. W.G. Waldrop – A landlord has not acted unreasonably by refusing to allow the sublease of a commercial property based on the objections of other tenants to the nature of the proposed occupancy.
Steve Evans leased from W.G. Waldrop a piece of commercial property that was part of a shopping center. The five-year lease term began in April 1999. However, in May 2000, Evans stopped paying rent. Eventually, Waldrop sued Evans for breach of the lease agreement, and Evans asserted as a defense that Waldrop had unreasonably withheld consent from Evans to sublease the property to Miller, who wanted to operate an electronic bingo arcade on the property.
The lease between Waldrop and Evans contained a clause that required Waldrop’s written consent for Evans to sublease the property, but further provided that Waldrop could not “unreasonably” withhold his consent. The evidence at trial was that Waldrop had initially provided verbal consent to allow Evans to sublet the property to Miller, but within a couple of days, he had revoked his consent. In the meantime, Evans and Miller entered into a rental agreement, which they dissolved after Waldrop withdrew his consent to subleasing the property for use as a bingo parlor. Waldrop expressed to Evans that he did not want that type of business on the premises.
Following a non-jury trial, the court entered judgment in Waldrop’s favor in the amount of $36,000.00 for unpaid rent. Evans appealed to the Alabama Court of Civil Appeals, in the matter of Steve Evans v. W.G. Waldrop [Ms. 2150342], — So.3d — (Ala.Civ.App. 2016). The issue before the appellate court was whether Waldrop’s withholding of consent to sublet was unreasonable.
Burden of Proof – Reasonableness Standard
The tenant has the burden of showing that a landlord has acted unreasonably in refusing to consent to a sublease. See Pantry, Inc. v. Mosley, 126 So.3d 152, 158 (Ala. 2013). The landlord’s reasonableness is determined according to the commercial-reasonableness standard, which has been defined as follows:
“Among the legitimate factors landlords may consider in assessing reasonableness [are]: the financial responsibility of the proposed assignee or subtenant, whether the new tenant’s use will require alteration of the premises, the legality of the proposed use, the nature of the occupancy, and the compatibility of the tenant’s use with the uses of the other tenants in the same shopping center or office building. Courts have held it improper for a landlord to reject an assignee or sublessee on considerations of personal taste, sensibility or convenience.”
Rowley v. City of Mobile, 676 So.2d 316, 318-319 (Ala.Civ.App. 1995).
Reasonableness Is a Question of Fact
Whether the landlord acted reasonably is a question for the trier of fact. Homa-Goff Interiors, Inc. v. Cowden, 350 So.2d 1035, 1038 (Ala. 1977). In a statement of somewhat circular reasoning, the Alabama Court of Civil Appeals held in Rowley that a “landlord does not unreasonably withhold consent to an assignment unless the landlord is presented with – and rejects – a prospective assignee who … meets commercially reasonable standards.” 676 So.2d at 319.
The evidence before the court in the subject matter was not sufficient to show that Miller’s proposed business was likely to succeed. In fact, Miller had never operated a business before. Additionally, Waldrop expressed concern about the negative effect of Miller’s bingo arcade on the other businesses in the shopping center. The appellate court has previously found that the nature of a proposed tenant’s occupancy and its compatibility with established tenants are legitimate concerns for the landlord to consider. Rowley, 676 So.2d at 319.
The appellate court found that Evans did not meet the burden of showing that Waldrop acted unreasonably in withholding or revoking consent to allow Miller to sublease the property for the reasons Waldrop gave.
Photo by Bill Selak.