Sunday, April 22, 2007

LESSOR CANNOT ARBITRARILY WITHHOLD CONSENT TO ASSIGNMENT OF LEASE [Florida]

An important provision in leases is assignability. Usually, the landlord is very interested in requiring its consent to an assignment of a lease since it wants to control who its tenant is. The tenant usually wants the ability to assign the lease so it can minimize its economic loss if it wants to move or otherwise cease to be the tenant during the term of the lease.

In SPEEDWAY SUPERAMERICA, LLC, v. TROPIC ENTERPRISES, INC., SUNOCO, INC. (R&M), and MASCOT PETROLEUM COMPANY, INC., the lease provided that "Lessee shall not assign or transfer this lease, or any interest therein, without the prior written consent of Lessor." The tenant sought to assign the lease to a third party, and the Lessor refused to consent. In legal proceedings, the landlord argued that per the express terms of the lease, it could refuse to consent to an assignment, and was not obligated to be reasonable in its refusal. The trial court agreed.

On appeal, the 2nd District Court of Appeal reversed the trial court. It held that even though there is no express obligation that the landlord needed to act reasonably in reviewing a request to assign the lease, the implied covenant of good faith that is present in all contracts imposes a duty of commercial reasonableness on the landlord.

This probably does not mean that a landlord always has to act reasonably in determining whether to approve a lease assignment. The 2nd DCA noted that the lease did not expressly provide that the landlord's discretion to withhold consent was "absolute." Presumably, if the lease had expressly provided for "absolute discretion" in the landlord on this issue, then the duty of commercial reasonableness would not have been applicable.

SPEEDWAY SUPERAMERICA, LLC, Appellant, v. TROPIC ENTERPRISES, INC., SUNOCO, INC. (R&M), and MASCOT PETROLEUM COMPANY, INC., 32 Fla. L. Weekly D1032b (2nd DCA, April 20, 2007).

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