Case update Scotland — retail park: whether tenant withholding consent to further development by landlord was reasonable

In Aviva Investors Pensions Ltd v McDonald’s Restaurants Ltd, which was heard in the Outer House of the Court of Session, the judge (Lord Malcolm) held that a tenant of a unit in a retail park had acted reasonably in withholding consent to a proposal by the landlord to develop an additional unit nearby, on the basis that there was insufficient car parking capacity.

By way of background, Aviva Investors Pensions Ltd is the landlord of Corstorphine Road Retail Park in Edinburgh, and McDonald’s Restaurants Ltd is the tenant of a unit in the park, which is operated as a McDonald’s restaurant with ‘drive-thru’ lane.

Aviva entered into an agreement with Costa Ltd to construct a freestanding retail unit with a drive-thru lane on a part of the retail park’s car park that was to be leased to Costa and used as a coffee shop. The lease of the McDonald’s unit provided that the landlord (in other words Aviva) could only pursue this arrangement (with Costa) with the consent of the tenant (in other words McDonalds), ‘such consent not to be unreasonably withheld or delayed’…

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