Q&As

A (original tenant) assigned lease to B (current tenant). A entered into an authorised guarantee agreement(AGA). B is now assigning the lease to C (proposed assignee). Can A stand as guarantor for C, ie can a previous tenant who has given an AGA stand as guarantor for a proposed assignee down the line?

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Published on LexisPSL on 19/08/2019

The following Property Disputes Q&A provides comprehensive and up to date legal information covering:

  • A (original tenant) assigned lease to B (current tenant). A entered into an authorised guarantee agreement(AGA). B is now assigning the lease to C (proposed assignee). Can A stand as guarantor for C, ie can a previous tenant who has given an AGA stand as guarantor for a proposed assignee down the line?

The Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995) made considerable changes to the extent to which a tenant could be liable for breaches of covenant after assignment. Until it came into force on 1 January 1996, even after assignment, the original tenant remained liable for any default by an assignee. In the case of long leases assigned at a relatively early stage, this could result in a liability when no benefit had been enjoyed from the lease for some years.

LT(C)A 1995 draws a distinction between old tenancies (broadly, those in existence when it came into force) and new tenancies (broadly those entered into after 1 January 1996). Where a tenant assigns its interest under a new tenancy, then as from the assignment, the new tenant has the benefit and burden of covenants under it. .This is no different from the former position. The original tenant is, however, also released from its covenants under the lease and no longer enjoys the benefit of them.

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