Typically, a tenant's bank guarantee is drawn in favour of
the landlord pursuant to the lease, and it is the landlord who
demands payment under the bank guarantee in circumstances of tenant
default.
Where a property is transferred to a new owner, that party
sometimes has difficulty obtaining a bank guarantee from the tenant
in favour of the new owner, or in some circumstances may overlook
the need to get a bank guarantee in its favour. In such
circumstances the new owner will retain the bank guarantee drawn in
favour of the previous owner.
The contract for sale of a tenanted property often includes a
provision requiring the seller to claim on the bank guarantee
(where a tenant is in default) for the benefit of the new owner
where a bank guarantee in favour of the new owner has not been
provided after settlement of the sale.
