Assignment of Commercial Leases - The Reasonableness Standard and Withholding Consent: Kendall v. Ernest Pestana, Inc.

DePaul Law Review, Jan 2015

By Hayner Lynn, Published on 01/01/87

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Assignment of Commercial Leases - The Reasonableness Standard and Withholding Consent: Kendall v. Ernest Pestana, Inc.

Recommended Citation Hayner Lynn, Assignment of Commercial Leases - Th e Reasonableness Standard and Withholding Consent: Kendall v. Ernest Pestana, Inc. Assignment of Commercial Leases - The Reasonableness Standard and Withholding Consent: Kendall v. Ernest Pestana, Inc. Hayner Lynn 0 0 Thi s Notes is brought to you for free and open access by the College of Law at Via Sapientiae. It has been accepted for inclusion in DePaul Law Review by an authorized editor of Via Sapientiae. For more information , please contact - INTRODUCTION In Kendall v. Ernest Pestana,Inc.,I the California Supreme Court held that commercial lessors may not unreasonably withhold consent from a tenant's assignment of the lease. While all jurisdictions require reasonableness when the lease prohibits unreasonable withholding of consent, 2 jurisdictions are split over the imposition of reasonableness into an unqualified consent clause. When a lease contains an unqualified consent clause, the majority of jurisdictions allow a lessor to withhold consent for any reason, 3 while the minority of jurisdictions require the lessor to show reasonableness.4 Prior to Kendall, California had not clearly adopted the majority or minority rule. 1. 40 Cal. 3d 488, 709 P.2d 837, 220 Cal. Rptr. 818 (1985). 2. See, e.g., Robinson v. Weitz, 171 Conn. 545, 370 A.2d 1066 (1976) (finding of reasonableness in consent denial when lessor's accountants unable to verify proposed assignee's financial statements); Roundup Tavern, Inc. v. Pardini, 68 Wash. 2d 513, 413 P.2d 820 (1966) (lessor's objection to sublessee's use of premises for tavern does not satisfy express reasonableness requirement). See R. SCHOSHINSKI, AMERICAN LAW OF LANDLORD AND TENANT (1980) [hereinafter SCHOSHINSKI]. Schoshinski explains that if a restrictive provision states that the lessee will not assign without the lessor's consent, and further provides that such consent will not be unreasonably withheld, the lessor may not withhold consent without sufficient reason under the circumstances. Id. at 581. The standard of reasonableness is an objective one, and personal objectives of the lessor usually are not considered by the court. Id. For a discussion of the reasonableness standard as imposed by either contract provision or judicial implication, see Todres & Lerner, Assignment and Subletting of Leased Premises: The Unreasonable Withholding of Consent, 5 FORDHAM URB. L.J. 195 (1977). The article analyzes the common law parameters of the reasonableness requirement concluding that the term is neither well established nor generally known. Id. at 196-97. See also infra note 136 and accompanying text. 3. See Richard v. Degen & Brody, Inc., 181 Cal. App. 2d 289, 5 Cal. Rptr. 263 (1960); Jacobs v. Klawans, 225 Md. 147, 169 A.2d 677 (1961); Segre v. Ring, 103 N.H. 278, 170 A.2d 265 (1961); Dress Shirt Sales, Inc. v. Hotel Martinique Assoc., 12 N.Y.2d 339, 190 N.E.2d 10, 236 N.Y.S.2d 613 (1963); Isbey v. Crews, 55 N.C. App. 47, 284 S.E.2d 534 (1981); B & R Oil Co., Inc. v. Ray's Mobile Homes, Inc., 139 Vt. 122, 422 A.2d 1267 (1980); 3A R. THOMPSON, COMMENTARIES ON THE MODERN LAW OF REAL PROPERTY ยง 1205 (J. Grimes ed. 1981) [hereinafter THOMPSON]. 4. Cases adopting the minority view include: Homa-Goff Interiors, Inc. v. Cowden, 350 So. 2d 1035 (Ala. 1977) (setting forth moral need for the change); Hendrickson v. Fredricks, 620 P.2d 205 (Alaska 1980) (adopting minority view even though breach was found because assignment had been made without request for consent); Schweiso v. Williams, 150 Cal. App. 3d 883, 198 Cal. Rptr. 238 (1984) (relying in part on the scarcity of commercial space); Cohen The Kendall court adopted the minority rule, but neglected to consider the impact of the decision. The court failed to state whether a lessor may reserve the right to unreasonably withhold consent. If parties are allowed to draft "unreasonable consent" provisions into their leases, the effect of the Kendall decision may be simply that California attorneys will routinely include these provisions in the parties' leases. Kendall evidences the growing strength of the minority trend. This Note discusses the reasoning applied by both the minority and majority jurisdictions. The Note then proposes that the minority courts, in their efforts to support the rights of tenants, have been too quick to set aside fundamental principles of property and contract law. Furthermore, the minority jurisdictions have not defined the imposed reasonableness standard or distinguished the reasonableness standard from the duty of good faith. II. BACKGROUND While a lease may be characterized as a contract to create an estate, it is also a conveyance of land.' Because the law favors the free alienation of property, the power of assignment is a legal right incident to a leasehold estate. 6 Under common law, a tenant had the right to assign his leasehold v. Ratinoff, 147 Cal. App. 3d 321, 195 Cal. Rptr. 84 (1983) (while holding that p (...truncated)


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Hayner Lynn. Assignment of Commercial Leases - The Reasonableness Standard and Withholding Consent: Kendall v. Ernest Pestana, Inc., DePaul Law Review, 2015, Volume 36, Issue 2,