Plaintiff/Landlord sued defendants/tenants Julian et al. in District Court for repossession of his property, claiming that under a lease clause requiring the landlord's consent for a sublet, the landlord may withhold consent for any reason, and that the tenants' subletting without permission constituted a breach of the lease that entitled the landlord to repossession of the premises.  The District Court entered judgment for landlord/Christopher and the tenants/Julian appealed to the Circuit Court for Baltimore City, which affirmed the judgment. 

The tenants/Julian filed a writ of certiorari to the Court of Appeals of Maryland, which granted cert. 

(b) Does this new rule prohibiting a landlord from unreasonably withholding consent apply in this case in which the rule is adopted even though the lease between the parties was entered into before the adoption of this rule, when the landlord could withhold consent for any reason? 

(b) Yes.  This new rule prohibiting a landlord from unreasonably 
withholding consent does apply in this case in which the rule is adopted even though the lease between the parties was entered into before the adoption of this rule, when the landlord could withhold consent for any reason. 

Public policy requires that the landlord act reasonably when a lease clause requires consent for subletting or assigning.  If a landlord may arbitrarily withhold consent, then the tenant's right to sublet or assign is virtually nullified.  Most tenants would expect that a landlord under such a clause would be required to act reasonably and would not be free to completely deny the right to sublet or assign. 

There are two public policy reasons why the common law should be rejected.  First, public policy disfavors restraints on alienation.  In the absence of a consent clause, tenants may freely sublet or assign.  Although lease clauses restricting alienation are permitted, they are strictly construed so as to favor tenants' rights of alienation.  Secondly, in a lease as in other contracts, there is an implied covenant of good faith and fair dealing, which dictates a reasonableness standard in a lease that does not specify a standard for withholding consent. 

(b) The new rule applies to this case for two reasons.  (1) If the ruling were purely prospective it would be mere dictum.  (2) The tenants should benefit from their effort and expense in challenging the old rule.  Otherwise, there would be no incentive for a litigant to appeal from a decision upholding a precedent.  However, the new rule should not be applied to this case if the landlord carries the burden at the trial on remand of proving that he actually knew of and relied upon the common law rule of Jacobs v. Kawans. 

(In dicta, the Court stated that obvious examples of reasonable refusals to consent to a particular sublease are: financial irresponsibility or instability of the transferee and unsuitability or incompatibility of the transferee's intended use of the premises.  The Court also stated that if the landlord refuses to consent to a sublease solely for the purpose of increasing the rent, the refusal is unreasonable, unless the sublease will necessitate extra expenditures by or more economic risk for the landlord.  Finally, the Court stated that the new Maryland rule prohibiting a landlord from unreasonably withholding consent to sublease or assign applies, beyond this case, only to cases involving leases entered into after the date of this decision.  Leases entered into before the date of this decision should be interpreted under the law that existed at the time the agreements were executed.  It would be unfair to upset those transactions, and the courts should protect the right of contracting parties to rely on existing law.) 

The Court reversed the Circuit Court's affirmance and remanded.