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ARTICLE · 20 MAY 2016

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.

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 update, we will summarise the case and let you know what you need to do now.

Case

In EMI Group Ltd v O & H Q1 Ltd1 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 of liabilities, whether on the tenant or the guarantor. This

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