The following Property guidance note provides comprehensive and up to date legal information covering:
At any point in the economic cycle landlords will want to protect themselves against tenant default, particularly in the case of potentially high risk tenants such as a recently incorporated small company or an insignificant subsidiary, or where the cost of enforcement is likely to be high as in the case of a foreign corporation. In times of recession (or credit crunch) the need for protection is a factor in every letting.
Landlords frequently seek a covenant from the guarantor as principal debtor or primary obligor so that the guarantor’s liability is direct and not merely secondary to that of the tenant. The extent of the guarantor's liability is a question of construction of the contract of guarantee, but it can never exceed the liability of the principal debtor. It is unlikely that a covenant given in those terms will displace the essential nature of the guarantor’s liability, which is secondary to and generally co-extensive with that of the tenant. The general law of guarantees continues to apply and so landlords must ensure that guarantee clauses contain protective wording to avoid release of the guarantor in certain well-known circumstances. They include:
giving time—if a landlord 'gives time' to the tenant in a binding manner, this will (unless there is suitable protective wording) release the guarantor. To
**excludes LexisPSL Practice Compliance, Practice Management and Risk and Compliance. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
Take a free trial
0330 161 1234