Landlords beware!
The recent case Good Harvest Partnership LLP has important implications for landlords. This case held that a guarantor of an outgoing tenant cannot give a direct guarantee for an incoming tenant’s obligations under any assigned ‘new’ lease. Any direct guarantees given between an outgoing tenant’s guarantor and a landlord in this way are now void and unenforceable.
Landlords, do you have leases that were completed on or after 1 January 1996 that have guarantors, and have since been assigned? Or, are you thinking of granting a new lease an insisting on a guarantor? If so:
• Review any previous assignments to check whether you have any guarantees that would be declared void following this case. Seek legal advice.
• When granting any new leases, ensure your legal advisers consider this point when drafting the clauses dealing with assignment.
Until any appeal, the case is clear on the points set out above. However this case also shed uncertainty on a further point. It is as yet unclear whether the outgoing guarantor can guarantee the obligations of the outgoing tenant under their AGA.
Legal advice should be taken if you are concerned that any of the issues raised may affect your security. For further information, please contact Stuart Bailey or Suzannah Strickland on 01905 723131.