The second provision concerns the fact that otg`s `guarantee and other obligations arising from the lease` remain `fully effective` and are extended to the obligations of the lessee departing from the AGM. According to section 24 of the Act, an OTG is required to be released from its existing security when the lease is assigned. Any attempt to extend the obligations of this guarantor after the assignment is unenforceable. The most extreme example of this is emi Group Ltd v. O&H Q1 Ltd [2016] EWHC 529 (Ch), in which an OTG took over an assignment of the lease and that assignment was annulled by Section 24, since the OTG as a whole had the effect that otG was never effectively released from its obligations. Although it appears that this point was argued in this case, the High Court held that the “natural effect” of the terms used in the second provision was to “create a new obligation”. In view of the EMI`s judgment, it would not be surprising if this point were to be appealed. be an agreement in which the tenant guarantees the performance of the obligations from which the tenant has been released by the assignee. If a tenant assigns in violation of the agreement or by operation of law, the tenant has not been released (see Unauthorized Assignments and AGM), and if a tenant assigns their lease to a new tenant (assignee), the landlord may require the tenant to enter into an AGM with the landlord as a condition of accepting the assignment of the lease.

An AGM is a form of guarantee that the (outgoing) tenant gives to the landlord only if the assignee does not meet the tenant`s obligations under the lease, such as. B the payment of rent, repair of the property, etc., the outgoing tenant will do it. In other words, the departing tenant becomes the guarantor of the assignee. Landlords need to make sure that every wording they use is on the right side of the distinction between a sub-guarantee and a direct guarantee, otherwise they may find that they cannot assert the guarantee right at the exact time they need it most (in this case, when both the assignor and the outgoing tenant have entered the administration). It is crucial that the OTG always guarantees only the performance of the departing tenant and not the performance of the transferee. Although, in this case, the second provision was considered an enforceable sub-guarantee, we caution against using this wording for two reasons: first, because it was not clear enough to avoid a dispute; and second, for the reason mentioned below. The High Court ruled that this was a valid sub-guarantee (in accordance with the 2018 summary judgment). The decision could be justified in two ways: the law requires that when a new lease is awarded, the departing tenant be released from the tenant ties and at the same time each guarantor of that departing tenant be exempted from his guarantee. The only limitation is that the departing tenant may need to enter into an AGM to ensure the transferee`s performance of the tenant contracts in the lease.

Case law has established that the guarantor of the departing tenant (OTG) can in turn guarantee the performance of the obligations of the tenant starting from the AGM (a sub-guarantee). However, if the OTG guaranteed the tenant`s compliance with the tenant`s obligations, it would be a direct guarantee and would be invalidated by the anti-avoidance provisions of the law. An AGM is an agreement in which the departing tenant guarantees the landlord the performance of the obligations of the lease from which the departing tenant is exempted by the new tenant. These obligations include (but are not limited to) the payment of rent and other expenses in the property and compliance with repair and decoration agreements. However, this waiver is qualified because the landlord has the option of requiring the departing tenant at the time of the assignment to guarantee the obligations of the new tenant (the “assignee”) through an “authorized contract of guarantee”, commonly known as an “AGM”. This guarantee is only valid until the assignee assigns its share of the lease – in the case of this subsequent assignment, the guarantor`s AGM ceases to apply. If a commercial lease is assigned (transferred) to a third party, the outgoing tenant is no longer the “tenant” under the lease and may assume that he or she has no permanent responsibility for the property. However, to assign a commercial lease, a tenant generally needs to obtain the landlord`s consent (consent must not be unreasonably withheld or delayed).

If the lease is a “new lease” (which is entered into after 1. January 1996, unless it was granted on the basis of an agreement, option or court order before 1996) and it is stated that the landlord may apply for a lease, the landlord may apply for an AGM as a condition of consent. The limits of the characteristics that an AGM may and may not have are set out in the Landlords and Tenants Act 1995. An AGM may require the departing tenant to take over the lease or take over a new lease for the remainder of the lease term if the assignee goes bankrupt or goes into liquidation. However, an AGM may not contain an obligation for the departing tenant to ensure the performance of an obligation of a person other than the assignee. .