Licence to Assign and Authorised Guarantee Agreements

Most Landlords considering granting consent to the assignment of a lease will require the current Tenant to enter into an authorised guarantee agreement with the Landlord. This is usually incorporated in the Licence. Under the Authorised Guarantee Agreement, the Tenant provides a guarantee for any faults or omissions by the Assignee.

The following is an example of the typical wording that is used in the Licence to cover this issue:

1. The Lease being a new tenancy for the purpose of the Act, the Tenant has agreed to enter into this Deed in the circumstances set out in section 16(3) of the Act as an authorised guarantee agreement for the purpose of the Act with respect to the performance of the lessee’s covenants contained in the Lease by the Assignee.

2. In consideration of the licence to assign contained in this Deed being granted at its request, the Tenant covenants with the Landlord that:

2.1 the Assignee will throughout the term pay the rents reserved by the Lease as from time to time reviewed and observe and perform all the covenants on the part of the lessee contained in the Lease

2.2 in case of default or delay by the Assignee or the disclaimer of the Lease the Tenant will pay the rents reserved by the Lease as from time to time reviewed and observe and perform all the covenants on the part of the lessee contained in the Lease and

2.3 if the Lease is disclaimed the Tenant will forthwith upon being required so to do by the Landlord by written notice given at any time take up a new lease of the Premises (subject to and with the benefit of the Lease if and insofar as its subsists) and deliver to the Landlord a duly executed counterpart thereof for a term commencing on the day after the date of such notice and expiring on the day the term of years granted by the Lease is due to expire and otherwise on the same terms (mutatis mutandis) as the Lease and will pay rent as from the commencement of such terms and all reasonable costs in connection with the giving of such notice and the granting of the new lease.

3. Without prejudice to the rights of the Landlord against the Assignee as principal, the Tenant as a separate and independent stipulation agrees that any liability mentioned above which may not be recoverable on the footing of a guarantee whether by reason of any legal limitation, disability or incapacity of the Assignee or any other fact or circumstance and whether known to the Landlord or not shall nevertheless be recoverable from the Tenant as though the same had been incurred by the Tenant and the Tenant were the sole or principal debtor and shall be paid by the Tenant on demand together with interest (as well after as before any judgement) at the rate of three per centum per annum above the base rate of the Royal Bank of Scotland plc (or such reasonably equivalent alternative rate as the Landlord may specify) from time to time from the date of demand until payment.

4. The provisions of this clause shall be in addition to and not in substitution for any other rights which the Landlord may have and may be enforced against the Tenant whether or not recourse has been had to any such rights and whether or not any steps or proceedings have been taken against any other person.

5. The rights of the Landlord and the obligations of the Tenant shall continue to subsist notwithstanding:

5.1 any neglect or forbearance by the Landlord in endeavouring to obtain payment of the said rents or enforcing the observance and performance of the said covenants and conditions or any time which may be given to any other person:

5.2 any refusal by the Landlord to accept rent tendered by or on behalf of the Assignee

5.3 any variation in the terms of the said covenants and conditions agreed between the Landlord and the Assignee

5.4 the release of any one or more persons from the time being constituting the Tenant or

5.5 any other act, omission, matter or thing by which (but for this provision) the Tenant would be exonerated either wholly or in part from this clause other than a release under seal given by the Landlord.

If you are a Landlord, Tenant or Assignee considering a Licence to assign a lease, then it is advisable that you instruct a good legal advisor to have a properly drafted Licence.

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