CAN A LANDLORD BE ARBITRARY WHEN A TENANT SEEKS ITS APPROVAL?

What happens when a lease states that it may not be assigned without the landlord's written consent and the landlord decides to condition its consent on some action by the tenant that is not required by the lease? Isn't there an implied duty of good faith in each party's performance of its contractual obligations, and won't that help the tenant get the landlord's consent without having to give in to the landlord's new demand? Would it matter if the tenant can prove that the landlord's refusal to grant its consent will cause the tenant to lose a lucrative opportunity to sell its business?

This set of facts was litigated here in Washington in the 1996 case of Johnson v. Yousoofian. Yousoofian, the landlord, had recently agreed to a new ten year lease for Johnson, the tenant, and claimed he did so in reliance on Johnson's promise to do certain structural remodeling of the leased premises. Neither the new lease nor any other writing set out this requirement. Johnson did nothing about remodeling, but quickly found a buyer willing to pay a very attractive price for his Little Deli Mart business. The purchase was made contingent on Yousoofian's consent to an assignment of the new lease. Yousoofian said he would not consider consenting until the remodeling was taken care of. While Johnson and Yousoofian were dancing around the remodeling issue the purchase agreement lapsed, and Johnson and the potential buyer were unable to agree on how to revive it.

Johnson then sued Yousoofian for damages for breach of the lease and intentional interference with the sale of his business. He argued that the lease, like every contract, contained an implied covenant of good faith and fair dealing, and that this covenant was breached when Yousoofian insisted on conditioning his consent to the assignment on satisfaction of the remodeling requirement which appeared nowhere in the lease. The court observed that the assignment provision in the lease stated that the "[Tenant] shall not . . . assign this lease . . . without the written consent of the [Landlord]." There was no provision saying that this consent could not be unreasonably withheld. The court agreed that a duty of good faith and fair dealing is deemed to exist in every contract, but stated that it arises only in connection with the performance of specific contract obligations. It held that when no contractual duty exists, there is nothing that must be performed in good faith. Since there was no requirement in the lease that Yousoofian consent to any assignment, there was no duty to which the implied covenant of good faith could attach. In other words, the way this lease was drafted, the landlord could be quite arbitrary and even unreasonable when asked to consent to an assignment. And this has not changed. The same court held essentially the same way in a 2002 case