Jack Frost Sales v. Harris Trust & Savings Bank

Appellate Court of Illinois · Property

PropertyLease assignmentLandlord consentassignmentsubleaselandlord consentunreasonable withholdingcommercial reasonableness

Facts

Plaintiff leased and operated a bar and entered into a contract to sell the business, conditioned on the purchaser or a corporation to be formed obtaining an assignment of plaintiff's remaining leasehold or a new lease. Plaintiff's lawyer and the buyers' lawyer met with Cuneo, who managed the property, to seek consent; there was evidence from plaintiff's witnesses that Cuneo would not discuss assignment, but the proposed buyers testified they did not want the deal once they learned there was no five-year option. The proposed assignee was a newly formed corporation with stated capital of $1,000, no business activity, and no evidence it actually had funds, and the financial information provided to Cuneo concerned individual participants rather than the corporation. Plaintiff nevertheless claimed defendants wrongfully withheld consent and caused the sale to fail.

Issue

Whether the landlords unreasonably withheld consent to an assignment of the lease. More specifically, whether plaintiff proved that there was an assignee ready, willing, and able to accept the lease and that the proposed assignee met reasonable commercial standards, including financial responsibility.

Rule

When a lease prohibits assignment or sublease without the landlord's consent, the landlord may not unreasonably withhold consent. But the tenant has the burden to prove it tendered a proposed assignee or sublessee who was ready, willing, and able to take the lease and who met reasonable commercial standards; a key factor is financial responsibility, and the landlord may refuse consent until satisfactory proof of that responsibility is provided. Consent to an assignment also requires an assignee willing to accept the lease.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nora Kim leases retail space in Chicago from Lakeview Square Holdings under a lease barring assignment without the landlord's consent. When Nora's lawyer asks the property manager to review a proposed assignment package, the manager says he is "not discussing transfers at all" and ends the meeting without reviewing anything.

If Nora later sues for wrongful withholding of consent, which is the strongest argument that the landlord did refuse consent?

Explanation. The majority held that refusal need not be expressed in precise words. A landlord's unwillingness even to discuss or consider the request can itself constitute a refusal to consent. But that only establishes refusal, not necessarily unreasonable withholding.