The recent case of K/S Victoria Street v House of Fraser
(Stores Management) Limited gives some clarity about
guarantees following an assignment of a lease.
In the current economic climate, landlords are more keen than
ever to obtain guarantees from prospective tenant's parent
companies or other group companies where they perceive that a
prospective tenant may not be financially strong. The guarantees
give the landlords an extra avenue for recourse in the event of
tenant default.
Last year the case of Good Harvest Partnership LLP v Centaur
Services Limited raised a number of uncertainties over what is
and what is not permitted by way of guarantees on assignment by the
relevant provisions of the Landlord and Tenant (Covenants) Act,
1995. The Court of Appeal's judgment in K/S Victoria Street
v House of Fraser gives much needed clarity to several issues
which have been in doubt, although it leaves several loose ends
unanswered.
