How can a tenant’s guarantor guarantee an assignee’s liability, ask Joanna Bhatia & Malcolm Dowden
In Good Harvest Partnership v Centaur Services [2010] EWHC 330 (Ch), [2010] All ER (D) 238 (Mar), the High Court confirmed that any guarantee by a tenant’s guarantor guaranteeing the tenant’s assignee is void. It falls foul of the anti-avoidance provisions in the Landlord and Tenant (Covenants) Act 1995, s 25 (LT(C)A 1995). The Court of Appeal, in K/S Victoria Street v House of Fraser (Stores Management) [2011] EWCA Civ 904, [2011] All ER (D) 262 (Jul) has supported the decision in Good Harvest, save in one respect, which offers a lifeline to landlords.
Good Harvest was controversial in light of the judge’s ruling that any guarantee actually given pursuant to an agreement to give one is void and not just the agreement itself. It overturned a significant strand of commentary on the anti-avoidance provisions, which distinguished between executory agreements (ie agreements that remained to be performed) and executed agreements. Counsel for the landlord in Good Harvest argued that once actually given by the outgoing tenant’s guarantor, a
