Has anyone seen my tenant’s guarantor…?24th January 2014
Landlords need to pay close attention to guarantors to ensure that they are not inadvertently released from liability
Best advice has always been to ensure that guarantors to leases are made a party to any subsequent changes or documents (such as deeds of variation or licences to assign, sublet or alter). This was emphasised in a recent case in which a landlord under a 1981 lease granted a licence to alter in 1987. The guarantor was not a party to the licence to alter and had not consented to the works to which it related. When the current tenant under the lease went into administration the guarantor was pursued by the landlord but argued it had been released, relying on a rule dating back to an 1878 case that said if a guarantor does not consent to a variation to a lease, it is released unless the variation is self-evidently insubstantial or one which cannot be prejudicial to the guarantor. The landlord failed in both the High Court and the Court of Appeal to convince the judges that there was no release. The obvious lessons are to ensure sureties are made a party to all licenses and changes to the letting documents.
For more guidance on lease drafting and other property management issues please contact Mark Levine