Posted by Richard Gorham, Solicitor
Landlord & tenant law – AGAs & GAGAs
It’s widely acknowledged that the coming into force of the Landlord and Tenant (Covenants) Act 1995 (the Act) on 1 January 1996 significantly changed the law regarding landlord and tenant liability following an assignment of a tenancy.
More than ten years on, there is still a raft of cases coming before the courts which require judicial opinion to clarify the provisions of the Act. In the case of EMI Group Ltd v O & H Q1 Ltd (EMI case), the High Court considered the validity of an assignment of a lease by a tenant to the tenant’s guarantor.
In the EMI case, the landlord, O & H Q1 Ltd (O & H), had granted a lease to HMV UK Ltd (HMW) in 1996. On the grant of the lease, EMI Group Ltd (EMI) guaranteed HMV’s obligations under the lease. The fate of HMV is well documented, so it may come as no surprise to hear that on HMV going into administration, EMI as the guarantor under the lease took an assignment of the lease, thereby becoming O & H’s tenant.
The steps that followed and the legal arguments put forward by EMI as to the enforceability of the tenant’s covenants under the lease against it are beyond the scope of this article. However, what is of note is the court’s application of the Act. That is, the court held that the assignment was void, since to accept that the assignment had taken place would have the effect of frustrating the broad anti-avoidance provisions of the Act.
The EMI case clarifies an important point of landlord and tenant law, as it made it clear that a tenant cannot assign its lease to a guarantor and any attempt to do so (as in the EMI case) will be of no effect. This is just the most recent case on which the court has handed down judgment on the application of the provisions of the Act in respect of AGAs.
For a more detailed look at the judgments made in a number of significant cases which center on the Act, and its application to AGAs and GAGAs, join us at our surveyors’ seminar, which will cover:
- when a landlord can call for an AGA,
- in what circumstances might an AGA be invalidated,
- in which ways a tenant / its guarantor can be held liable after an assignment of its lease, and
- when a GAGA will be valid.
Our surveyors’ seminar on Thursday 30 June will be an opportunity to discuss these, and other related issues, with the team in our Bath office.
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