However, if a guarantor attempts to ensure the execution of alliances by the assignee, this would be a ”direct guarantee”.” Such a direct guarantee would be nullified and unenforceable under the provisions of the 1995 law to avoid tax evasion. In the co-operational group Food v A-A Shah Properties, the High Court gave guidance on the sensitive question of how a surety can effectively secure the obligations of an outgoing tenant in an approved guarantee contract without violating the Landlord and Tenant (Covenants) Act 1995. Real estate specialist Martin McKeague explains and offers practical advice. The 2007 Business Price Leasing Code in England and Wales stipulates that an AGM should only be required from the landlord if the agent is financially less good than the outgoing tenant or if the agent is registered or resident abroad. It is proposed that a landlord accept for smaller tenants an agent`s lease deposit instead of an AGM from an outgoing tenant. The agent`s liability for the AGM ends at the end of the tenancy period or when the agent hands over the lease to a third party (depending on what happens first). The 1995 law provides that the outgoing tenant is dismissed from tenant alliances in the event of a contract and that any guarantor of the outgoing tenant is released from the guarantee at the same time. The 1995 Act contains provisions to prevent tax evasion, including preventing parties from evading this position. A second provision saw ”… the tenant`s guarantor accepts that his guarantee and other obligations arising from the tenancy agreement remain fully effective and…

the obligations he has undertaken and the tenant`s obligations under this licence extend and apply. This subtle and complex legislation can be important pitfalls, especially for unwary renters and anyone responsible for developing the various transfer and warranty documents. The issue was how a surety could guarantee the obligations of an outgoing tenant in an approved warranty contract (AGM) without violating the Landlords and Tenants Act (Covenants) Act 1995. If this were not the case, a condition would have imposed obligations on the tenant`s deposit equivalent to those which Section 24 LTCA wished to release in 1995, the order of the legislation. Good Harvest has resulted in any direct guarantee of an incoming tenant`s deposit not applicable to an incoming assignee. Most AAAs provide that the liability of a surety is automatically created when liability is incurred under the lease and does not require any formal request from the lessor. However, the S.17 of the Landlord – Tenant (Covenants) Act 1995 provides that under an AGM, the surety is not responsible for the rent, service charges or other ”fixed fees” that the assignee has not paid, unless the lessor has terminated the guarantor within six months of the expiry of the respective due date after the agent`s non-payment. This is described as a ”communication s.17.” ”Fixed fees” must be determined, so they may include compensation, assessed service charges or costs incurred by third parties. This procedure does not apply to unspecified debts, such as uns quantified claims for damages for Dies that are still involved, but not through this process.

The Landlords and Tenants Act came into force on January 1, 1996. The law abolished the ”no contract” – the relationship between the parties in a contract that allows them to sue each other, but prevents a third party from doing so – for all new commercial leases, whereas, in certain circumstances, an outgoing tenant may be obliged to guarantee his immediate assignee.