Guarantees and AGAs

Guarantees and AGAs

This Overview summarises the liability of a guarantor, when that guarantee may be released, how and when an authorised guarantee agreement (AGA) (and a sub-guarantee, also known as a GAGA) may be used, and the impact of disclaimer on a guarantee.

Guarantees

In order to protect against tenant default, landlords frequently seek a covenant from a guarantor as ‘principal debtor’ or ‘primary obligor’ so that its liability is not merely secondary to that of the tenant. The guarantor may also be obliged to take a new lease from the landlord if the current lease is disclaimed. The extent of the guarantor’s liability will depend upon the express terms of the relevant guarantee, but the guarantor's liability can never exceed the tenant's. Of benefit to the landlord is that a guarantor may remain liable even if the landlord's claim against the tenant is unenforceable.

Release

A guarantee can be lost where changes are made (expressly or by conduct) to the underlying contract. Guarantee clauses must contain protective wording to avoid release in the case of:

•
'giving time'—the guarantee should expressly prevent release despite

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