Be Wary Of Guarantees

In the current market, investment landlords will be doing all they can to ensure that potential tenants have full and sufficient covenant strength, as well as vetting proposed assignees and sub-tenants.  We are likely to see heads of terms containing belts, braces and more.  Landlords will be demanding guarantees from parent companies, from directors, from outgoing tenants on an assignment, from the guarantors of outgoing tenants and from anyone else they can get "on the hook". 

Cases concerning the efficacy of guarantees are bound to become more widespread.  The recent Powerhouse¹ case has certainly focused people's minds on the giving and accepting of guarantees as the judgment appeared to allow some scope to permit a guarantor who is solvent to escape the liability which it validly accepted when agreeing to enter into the guarantee.