The agreement provided that the guarantors to the original lease should act also as guarantors on any assignment. The tenant challenged this provision saying that it contravened the requirements of section 25 of the 1995 Act. HoF contended that such an arrangement would frustrate the intention of the Act.
Held: The provision stipulating in advance that the guarantor must re-assume that liability on an assignment operated to frustrate the working of section 24, and was therefore avoided by section 25: ‘If a landlord could (a) when granting a tenancy, impose an obligation on the tenant’s guarantor to guarantee the liability of the assignee in the event of an assignment, and (b) on an assignment by a tenant, enforce that obligation, it would, as a matter of ordinary language, ‘frustrate’ the operation of section 24(2). If it were otherwise, it would mean, for instance, that a landlord, when granting a tenancy, could require a guarantor of the tenant’s liabilities, on every assignment of the tenancy, to guarantee the liability of each successive assignee. Such an obligation (‘a renewal obligation’) would plainly be wholly contrary to the purpose of section 24(2), as it would enable a well-advised landlord to ensure that any guarantor was in precisely the position in which it would have been before 1995 Act came into force.’ However a guarantor could be asked to guarantee the tenants own continuing liability during the next tenant’s ownership.
In a case where the existing tenant entered into an AGA in respect of the covenant liabilities of the assignee, it was permissible under s.25 for the tenant’s liabilities under the AGA to continue to be guaranteed by the existing guarantor.
Lord Neuberger MR, Thomas Etherton LJJ
[2011] EWCA Civ 904, [2012] Ch 497
Bailii
Landlord and Tenant (Covenants) Act 1995 24(2)(b) 25(1)
England and Wales
Citing:
Cited – Good Harvest Partnership Llp v Centaur Services Ltd ChD 23-Feb-2010
The court considered whether the 1995 Act operated to prevent a guarantor of a lessee being required to provide a similar guarantor for an assignee. The tenant had created a sub-lease, and the lease required its guarantor to provide a similar . .
Appeal from – K/S Victoria Street v House of Fraser (Stores Management) Ltd and Others ChD 17-Dec-2010
The parties had agreed to sell property and to lease it back. The agreement provided that on an assignment of the lease, the existing tenant’s guarantor should also stand as guarantor for the incoming assignee, but not subsequently. It now appealed . .
Cited – London Diocesan Fund and others v Avonridge Property Company Ltd and Phithwa HL 1-Dec-2005
The defendant had taken on a lease of a parade of shops, and sub-let each shop for a full premium at a nominal rent. It sought to limit its own liability to pay the head rent by limiting the covenant in the sub-leases to pay the head rent to the . .
Cited by:
See Also – K/S Victoria Street (A Danish Partnership) v House of Fraser (Stores Management) Ltd and Others ChD 1-Dec-2011
Application the defendants sought permission to re-amend their defence and to add a counterclaim, raising for the first time pleas of rectification and estoppel by convention. . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant
Updated: 01 November 2021; Ref: scu.442233