The court looks at repeat guarantees again – a victory for common sense

Written on 2 Feb 2015

The High Court has decided that leases, which have been unlawfully assigned, can be assigned back to the original tenant, with a fresh guarantee, without the repeat guarantee becoming void under the Landlord and Tenant Act 1995 (the 1995 Act). As Gary Lawrenson (litigation partner at Osborne Clarke) remarks, “The upshot of this landmark decision is that a landlord can ‘unwind’ an unlawful assignment (without fear of losing the original guarantor). The anti-avoidance provisions of the 1995 Act do not bite in these circumstances. Previously, this was in doubt. This can be achieved (as we submitted for Topland – the landlord in this case) by a straightforward re-assignment. However, the original guarantor needs to enter a new guarantee, as there is a release of the original tenant and the guarantor with a simultaneous renewal of liability of the original tenant. Mr Justice Morgan has found that the new guarantee (by the original guarantor) is not invalidated because the original guarantor is only released ‘to the same extent’ as the original tenant (that is, not at all)”.