In other words, the outgoing tenant may be asked to enter into an AGM to ensure the buyer`s performance of the tenant`s covenants in the lease agreement. The following case law has shown that the guarantor of an outgoing tenant can guarantee the performance of the obligations of the AGM by the outgoing tenant as a sub-guarantee. In limited cases, the authorized warranty agreement applies beyond a second assignment – for example, if you were unable to obtain the owner`s agreement before the lease was assigned. In this case, your liability for the contract would last until the next assignment authorized by the owner. For other limited circumstances, the contract may be performed before the usual expiry date, for example. B if there is an infringement by the lessor, for example. B a substantial modification of the rental agreement, which is not the guarantor party. Under an Approved Warranty Agreement (AGM), an outgoing tenant guarantees some or all of an incoming tenant`s obligations under a lease agreement. It was introduced by section 16 of the Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995) to appease landlords whose position had been significantly reduced by the removal of the original rental liability. It applies only to “new” leases (i.e. those granted on or after 1 January 1996).
A lease agreement awarded on or after that date, but on the basis of a lease agreement, option or court order entered into before that date, is not considered a “new” lease. In the case of Good Harvest Partnership LLP v Centuar Services Ltd, the High Court decided that the direct guarantees provided by the outgoing tenant`s guarantor to secure the assignee`s obligations in an authorised warranty agreement (AGA) under section 25 of the Landlord and Tenant (Covenants) Act 1995 are void. When assigning a lease to which the Landlord and Tenants (Covenants) Act 1995 (1995 Act) applies, the question of whether (and how) a guarantor can secure an outgoing tenant`s obligations under an Approved Warranty Agreement (AGM) is a sensitive legal issue that can raise practical problems. The problem is often related to intra-group assignments. With regard to the first provision, the High Court found that both the original tenant and the guarantor (now a co-operational group) had committed to comply with the AGM`s commitments. The commitments therefore directly guaranteed the obligations of the assignee and were null and void and unenforceable vis-à-vis the surety. Your landlord can sue you, depending on the age of your lease and the approved warranty agreement. An AGM obliges an outgoing tenant to ensure the execution by the new tenant of the agreements contained in the lease agreement, but this only applies to leases granted from 1996 onwards. Taking on the role of guarantor exposes the outgoing tenant to the risk of significant financial costs if the new tenant proves unreliable and cannot meet the conditions set out in the rental agreement. In the Coop case, the AGM was ultimately considered an enforceable sub-guarantee solely on the basis of a provision of the assignment concession. .