Malcolm Dowden considers authorised guarantee agreements and Hindcastle
Where does loss lie when a liquidator disclaims a lease? Does it fall on the landlord or on the tenant's guarantor? After the property slump of the early 1990s, the House of Lords overturned previous authority to find that loss lay with the guarantor (Hindcastle v Barbara Attenborough Associates [1996] 1 All ER 737). Faced with a new recession in the property market, the Court of Appeal has confirmed that the same conclusion applies to the liabilities of a former tenant under an authorised guarantee agreement (AGA) (Shaw v Doleman [2009] EWCA Civ 283; [2009] All ER (D) 34 (Apr)).
Disclaimers & phantom leases
Guarantees protect landlords against the risk of a tenant defaulting on rent payments or other lease obligations. Until Hindcastle, guarantees could become worthless, at the moment of greatest need, when the liquidator of an insolvent tenant disclaimed the lease. For nearly a century authority followed Stacey v Hill [1901] 1 QB 660, where disclaimer under the Bankruptcy Act 1883 not only released the tenant from liability, but also triggered a consequential release
