In the case of an “old” lease, the original lessor and the original tenant are required to fulfill all the obligations of the landlord and tenant for the duration of the tenancy, even if they transfer their interests to someone else. This principle is called “fidelity to the contract”. For example, an original tenant, who assigned his lease a few years earlier, could, as a result of the default of the current tenant, obtain a claim on unpaid rents or for the performance of other tenant obligations, and he would have to pay or honor those obligations. This was seen as particularly distressing for tenants and seen as excessive protection for landlords. As a result, the 1995 Act stipulated that tenants and third parties were exempt from their assignment obligations. Depending on the strength of the tenant`s negotiating position, a tenant may try to insert a time limit for their liability as part of an AGM. An agreed time limit should be indicated either in the lease agreement or, if the time limit is agreed upon when a contract was approved, at the AGM, in order to protect the tenant`s position in a subsequent market. However, this does not mean that your commitments regarding the lease expire if you assign the lease agreement. Once a lease has been granted and the business unit has ended, you of course want to reduce the risk of your former landlord suing you in the event of a breach of the rental terms by your successor. The Court of Appeal clarified the law and confirmed the validity of the partial guarantees.

The decision confirms that, in the Coop case, the AGM was ultimately considered an enforceable sub-guarantee solely because of a provision in the concession authorization. A guarantor should not be asked to directly guarantee the obligations of an assignee. An owner should not accept such a guarantee if it is offered autonomously because it is ineffective. The limits of the characteristics that an AGM can and cannot have are set out in the Landlord and Tenant Act 1995. An AGM may require the outgoing tenant to take over the lease for the remainder of the lease term or take over a new lease if the assignee goes bankrupt or is in liquidation. However, an AGM must not entail an obligation for the outgoing tenant to ensure the performance of an obligation of a person other than the assignee. Tenants and their guarantors are automatically exempt from any liability to the lessor if a rental agreement is legally assigned to a third party.. .

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