Newsflash: Good Harvest II!

On 27 July 2011, the Court of Appeal handed down judgment in the appeal in K/S Victoria Street Ltd –v- House of Fraser and others (2011) EWCA Civ 904 confirming the earlier decision in the important case of Good Harvest in relation to guarantors. The Court confirmed the decision in Good Harvest with one important exception.

As a reminder, Good Harvest decided that a guarantor of an assigning tenant (the assignor) could not be validly asked to guarantee the obligations of the incoming tenant (the assignee). To do so would contravene the provisions of the Landlord and Tenant (Covenants) Act 1995, even where the guarantor voluntarily agreed to give such a guarantee. The Court of Appeal upheld this decision but also confirmed that a guarantor of the assigning tenant could, however, be required to guarantee the liability of the assigning tenant’s obligations under an Authorised Guarantee Agreement.

In light of this decision, Landlords should be reviewing their portfolios to check:

  1. In what circumstances guarantees have been given and whether the guarantees of the tenants and assignees are valid.

  2. Ensure new leases contain the necessary provisions requiring a guarantor of a tenant to guarantee the obligations of any assignee via an Authorised Guarantee Agreement.

 

If you require further information on this decision and its effect on you, please contact either Vanessa Joll or Kristine Ng by emailing Vanessa or Kristine by calling them on 08450 990045.

This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from taking any action as a result of the contents of this document.

15 August 2011