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Fri 07 Jan 2011

Landlord & Tenant Update - Guarantees

Landlord & Tenant Update - Guarantees

UPDATE - A recent High Court Case confirms that any agreement that required a tenant's guarantor to guarantee the obligations of the tenant's assignee of the lease, will be void"

In K/S Victoria Street v House of Fraser (Stores Management) Ltd [2010] PLSCS 278, the High Court held that an agreement that required the tenant's guarantor to guarantee the tenant's assignee's obligations, when the lease was assigned, was void under section 25 of the Landlord and Tenant (Covenants) Act 1995 (LTCA 1995). This confirms the decision in Good Harvest Partnership LLP v Centaur Services Ltd [2010] EWHC 330 (Ch) on this point (please see our newsletter Landlord and Tenant – Limitation of Guarantees)

This case does not, however, deal with the questions that remained unanswered in Good Harvest, namely:

  • Whether a voluntary guarantee given by the tenant's guarantor, guaranteeing the assignee's obligations, would also be void
  • Whether a "sub-guarantee", given by the tenant's guarantor, guaranteeing the tenant's obligations under an Authorised Guarantee Agreement, also fall foul of section 25 of the LTCA 1995?

We shall return to this important point for many people shortly. The Good Harvest case was settled so no appeal to the Court of Appeal was required.

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