Bank guarantees are often used by tenants to provide landlords
or principals under commercial or retail leases with security to
perform its obligations. Bank guarantees usually contain terms that
are standard amongst commercial leases and contracts and have been
known to provide landlords and principals with immediate access to
guaranteed funds without having to wait for a decision from a court
to confirm that the lessee has breached the lease.
RECENT CHANGES TO THE LAW
A recent decision, Universal Publishers Pty Ltd v Australian
Executor Trustees Ltd [2013] NSWSC 2021 casts doubt on the
proposition that landlords and principals have immediate access to
guaranteed funds and restricts the right of landlords and
principals to call on bank guarantees solely relying on a good
faith claim. This decision places the burden on landlords to ensure
that property or lease agreements are drafted to provide landlords
or principals with immediate access to the bank guarantees
