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ARTICLE · 31 MARCH 2016

Flash Update - Tenants Cannot Assign To Their Guarantors

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The High Court has held that a tenant cannot assign its lease to its own guarantor. This follows from the terms of the Landlord and Tenant (Covenants) Act 1995.

United KingdomReal Estate and Construction
Suzanne Gill
Suzanne Gill
Leah Freeman
Leah Freeman

The High Court has held that a tenant cannot assign its lease to its own guarantor. This follows from the terms of the Landlord and Tenant (Covenants) Act 1995. In this bulletin, we'll summarise the case and let you know what you need to do now.

Case

In EMI Group Ltd v O & H Q1 Ltd [2016] EWHC 529 (Ch) (please click here for the full judgement) a shop lease was guaranteed by EMI. The tenant went into administration in 2013. In November 2014 the lease was assigned to EMI, the guarantor, with the landlord's consent. The guarantor later sought a court declaration that the tenant covenants in the lease were void and could not be enforced against it. The guarantor argued that the effect of the Landlord and Tenant (Covenants) Act 1995 (the "Act") was that the guarantor (G1) of the tenant (T1) is precluded from becoming an assignee of the tenancy (T2). Judge Amanda Tipples QC agreed with this. The whole thrust of the Act is that there should be no re-assumption or renewal

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