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Covenant Liability

Depending on when the original lease was entered into, the tenant could potentially be liable for the enforcement of all obligations and covenants until the end of the lease term. This applies also in situations where the lease was sublet, or even assigned to a new tenant.

The rules encompassing this area of law make up a complex framework, and it is best practice to seek professional legal advice for expert clarification first.

At Seatons, our team of highly trained legal professionals have a wealth of experience in commercial landlord and tenant matters, and provide clear, easy to understand legal advice at low sensible fees. For more information, feel free to give us a call on 01536 276300.

Old Leases

These provisions apply to Leases granted before 1 January 1996.

If the original tenant assigns the lease, it will remain liable on its covenants in the lease throughout the remaining term for any breach of covenant committed by its successors, unless the landlord agrees to the contrary. It is useful to note that most leases for commercial premises will usually include a rent review clause. An original tenant could therefore find itself pursued several years after an assignment for its successor’s non payment of rent at a level over which it had no control.

In addition, the original landlord will also remain liable on its covenants to the original tenant for the length of the lease term, even it the reversion is assigned to a new landlord. An original landlord could also therefore find itself being pursued for a breach of covenant committed by its successor, even though it had long since had any involvement in the property. It was this type of perceived unfairness that resulted in the rules regarding covenant liability changing in 1995.

New Leases

These provisions apply to Leases granted on or after 1 January 1996.

Once a tenant lawfully assigns the lease, it is automatically released from the tenant covenants under it. Liabilities for any breaches committed prior to the assignment still continue. This applies to all original tenants and successive tenants. Nevertheless, landlords can, in certain cases, still require outgoing tenants to enter into an Authorised Guarantee Agreement prior to giving consent to assign the lease.

Authorised Guarantee Agreements

Depending on when the original lease was entered into, the landlord may demand the tenant to enter into an Authorised Guarantee Agreement when subletting/assigning the premises to another tenant. The landlord has the power to do this in situations where there are no rights granted in the lease for the tenant to assign the premises. An Authorised Guarantee Agreement must be signed by the tenant and makes the tenant liable for the obligations under the lease for the duration of the term, should the new tenant be unable to carry them out.

Gemma McKimmie - Seatons Solicitors

Commercial Property Specialists In Corby & Kettering

Hello, I am Gemma McKimmie and I am the Head of Seatons Solicitors Commercial Property Department. We aim to provide our clients with an outstanding legal service.

We will help and support you and most importantly we work hard for you.

Please contact us for a free, no obligation chat at either our Corby office on 01536 276300 or our Kettering office on 01536 311690 or contact us online.

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