AGAs - Landlords Must Look Forward And Not Back!

Landlords and tenants alike have become very familiar, and comfortable, with Authorised Guarantee Agreements ("AGAs") since their introduction under the Landlord and Tenant (Covenants) Act 1995. However, whilst AGAs may have become routine on assignments, it has always been unclear whether an original guarantor can be required to guarantee the outgoing tenant's obligations under an AGA. Many leases have assumed they can.

The question was recently addressed in the case of Good Harvest Partnership LLP v Centaur Services Limited (2010) EWHC 330 (Ch). In this case, Good Harvest was attempting to recover arrears of rent from defendant, Centaur, pursuant to an AGA it had entered into as guarantor. It was held that any attempt to extend the guarantor's liability beyond the lease, by requiring it to enter into a further guarantee when the lease was assigned, would frustrate the operation of the Act, and fall foul of the anti-avoidance provisions under section 25 of the Act.