Is My Guarantor Still On The Hook?

Summary and Implications

The Court of Appeal has confirmed that the rule concerning release of guarantors created by an 1878 case remains good law. Landlords run the risk of releasing a guarantor if a lease is varied or altered (where such change is not contemplated by the original contract), without the approval of the guarantor.

In managing portfolios, landlords should:

• consider carefully whether or not a guarantor should be consulted (and brought in to any contractual variation or alteration) whenever the obligations in a lease are altered or varied, however informally;
• evaluate portfolios of assets to ascertain whether there is any risk in respect of existing guarantees; and