Continuation of Guarantees on Lease Assignment

Originally published 29 July 2011

Keywords: tenant's guarantor, authorised guarantee agreement, AGA

The Court of Appeal has handed down judgment in K/S Victoria Street v. House of Fraser (Stores Management) Ltd¹ upholding the decision in Good Harvest Partnership LLP v Centaur Services Limited² that a tenant's guarantor is released on a lawful assignment of a lease (entered into after 1 January 1996)³ and cannot act as guarantor for the assignee either by way of an authorised guarantee agreement ("AGA") or by entering into a new contractual guarantee even if the guarantor is happy to do so.

There is, however, some good news for landlords. The Court of Appeal expressed the view that guarantors can be required to guarantee an assignor's obligations under an AGA and that they can also validly guarantee the liability of an assignee on a further assignment.