Lease Guarantees: What security can landlord's have?
The Court of Appeal has clarified the position in relation to Lease Guarantees following the recent House of Fraser case
What can Landlord's require on assignment:
- Where reasonable an outgoing tenant guarantor to sub-guarantee an AGA in respect of the incoming tenants liabilities.
- Where reasonable a guarantee from a guarantor (other than the guarantor of an outgoing tenant).
- It is acceptable for outgoing tenant guarantor to come back in as an assignee's guarantor on the next assignment.
What can Landlord's not require on assignment:
- An outgoing tenant guarantor to guarantee the liability of the incoming tenant (even if given voluntarily).
- An outgoing tenant guarantor to primarily guarantee the incoming tenant (except as a sub-guarantor under an AGA as above).
As a result of this case close attention needs to be given to the validity of any guarantees in place when buying or lending on an investment property. Those guarantees that pre-date the decision may now not be binding and be worthless to the Landlords, detrimentally affecting the value of the Landlord's reversion. The current law needs to be carefully reflected in your Leases.
For more information on this or for advice on any retail property issue, please contact: