Facts

In 1974, the plaintiff, 21 Merchants Row Corporation, entered into a commercial lease with the predecessor in title to the defendant, Merchants Row, Inc. The lease included a clause prohibiting the tenant from assigning or subletting without the landlord's express written consent, with no express limitations on the landlord's discretion.

The defendant acquired the premises in early 1983, and the relationship between the parties became acrimonious from the start. In the summer of 1987, the plaintiff agreed to sell its business, with the sale contingent on the defendant's consent to assign the lease to the buyer.

After negotiations and litigation, the defendant consented in writing in April 1988 to the assignment to the buyer, but reserved rights regarding future assignments. The buyer and plaintiff then sought the defendant's consent to assign the lease to the bank financing the purchase, which would grant the bank an absolute right to further assign without the landlord's consent. The defendant refused, citing loss of control over the property.

The plaintiff filed suit against the defendant, claiming breach of the lease, intentional interference with contractual relations, and violation of G. L. c. 93A, seeking damages for the wrongful withholding of consent. At trial, the defendant moved for a directed verdict at the close of the plaintiff's case and after all evidence, arguing that it had the right as a matter of law to refuse consent for any reason, but the motions were denied. A jury awarded the plaintiff $3,000,000 for breach of lease, $150,000 for interference with contractual relations, and $150,000 for the c. 93A violation. The defendant's motion for judgment notwithstanding the verdict was also denied. The defendant appealed, and the court granted direct appellate review.

Analysis

Issue #1

Issue

Does a commercial lease clause requiring the landlord's express written consent to an assignment, without express limitations on the landlord's discretion, imply an obligation that the landlord act reasonably in withholding consent?

Legal Rule

Under Massachusetts law, as established in Slavin v. Rent Control Bd. of Brookline, a lease provision requiring the landlord's consent to an assignment or sublease permits the landlord to refuse consent arbitrarily or unreasonably, without an implied reasonableness requirement. This rule applies to both residential and commercial leases, following the majority of jurisdictions and consistent with practitioner assumptions and legal commentary.

Rule Analysis

The lease clause at issue did not expressly limit the landlord's discretion in consenting to assignments, providing only that the tenant could not assign without the landlord's express written consent.

In Slavin, the court held that no reasonableness requirement would be implied in a residential lease's assignment clause, noting that a majority of jurisdictions allow landlords to refuse consent arbitrarily. Practitioners and authors had assumed this to be the rule in Massachusetts, supported by citations to legal texts and annotations.

No sound reason existed to depart from this rule for commercial leases or to grant greater protection to commercial tenants than residential ones, especially given commercial tenants' typically greater bargaining power at the lease drafting stage. Logic suggested that any differentiation should favor residential tenants. The court saw no rational distinction between residential and commercial leases in this context, as confirmed by cases from other jurisdictions. The question was one of public policy, which the Legislature could address.

Conclusion

No, the landlord is not obligated to act reasonably in withholding consent under such a clause. The judgment was reversed.