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ARTICLE · 21 OCTOBER 2013

Guarantees And The 'One That Got Away'

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It is often the case that a third party is called upon to guarantee a tenant's obligations under a lease, which provides a landlord with some degree of comfort that it has someone to turn to in the event of a tenant's demise.

United KingdomReal Estate and Construction
John Downs
John Downs

It is often the case that a third party is called upon to guarantee a tenant's obligations under a lease, which provides a landlord with some degree of comfort that it has someone to turn to in the event of a tenant's demise. The recent case of Topland Portfolio No 1 Ltd v Smiths News Trading Ltd illustrates how in some circumstances the reassurance of having a guarantor in place can be short-lived.

A lease was entered into in 1981 ("the Lease"). The tenant was WH Smith Do–It–All Ltd (then known as Payless DIY Ltd) ("the Tenant") and the guarantor was WH Smith & Son Ltd (known subsequently as Smiths News Trading Ltd) ("the Guarantor").  In 1987 a Licence for Alterations was entered into by the then landlord and the Tenant, but the Guarantor was not a party to the Licence (and did not consent to it).  Topland Portfolio No 1 Ltd ("Topland") subsequently acquired the freehold interest.

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