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//Lease not binding in the absence of bank’s consent

Lease not binding in the absence of bank’s consent

The High Court recently granted a receiver an injunction preventing the occupier of a premises from trespassing on the basis that the bank concerned had not consented to a lease.

In the case of Murphy v Hooton, the plaintiff was a statutory receiver appointed over a premises which was secured under a mortgage. The mortgage contained the usual covenant against assignment/ sub-letting to third parties unless the bank consents in advance in writing.

The defendant was the occupier of the premises, who claimed that she was granted an oral monthly tenancy by the borrowers some years earlier when she took over the running of the business of a homeless shelter at the premises. There was no written consent of the bank to a tenancy arrangement.

The defendant sought to resist the injunction, claiming that the bank was aware of her tenancy. Her primary claim in this regard was that she had attended a meeting some years previously with a representative of the bank and had explained the arrangement to him.

The court held that:-

1. The defendant had failed to establish an arguable case that the bank consented to a tenancy arrangement between the borrower’s and the defendant. The evidence of the consent must be clear, as must the terms of the arrangement in question.
2. The bank has a title which entitles it to recover possession of the property.

This case will be welcomed by both banks and receivers as it confirms that in cases where banks hold security over a property, the court will uphold the principle that it is essential that the secured property is available as security in the event of default by a borrower. Furthermore, it is an important case because it shows that any impediments to the realisation of security in the form of a lease which is binding on the bank should be one in respect of which the bank has furnished its consent.

For further information please contact Lisa Killeen, Senior Solicitor, Insolvency and Corporate Recovery Unit at [email protected].

 

2018-11-13T10:48:19+00:00February 18th, 2015|Latest News|

About the Author:

Lisa Killeen is a Partner in our property department. Lisa joined the firm in 2013 having previously worked in William Fry Solicitors. Lisa specialises in banking and finance transactions and […]

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