Alan Cooklin on the lack of escape for guarantors. Alan Cooklin is a former barrister.

Granted in 1976 and subsequently assigned and re-assigned, the 20-year business lease considered in Cheverell Estates v Harris & Haddon (unreported 31 July 1997) fell outside the main provisions of the Landlord and Tenant (Covenants) Act 1995, these being inapplicable to leases granted before 1 January 1996.

For the two defendants, distant memories were painfully revived when, as guarantors of the original tenant company, they were presented with a claim by the current landlords for some £15,000 of rent and other charges which they had failed to recover from the last occupying tenant, who was now bankrupt.

With no help from the automatic release provisions of the 1995 Act, the defendants turned to s17, one of the few sections applicable to pre-Act leases and intended to discourage landlords from leaving the original parties in ignorance of ever-mounting accumulations of arrears. By sub-section 2, no liability is incurred by an original lessee until he has been served with a notice stating the amount to be recovered, such amount being limited to sums which fell due over the previous six months. Sub-section 3 makes an almost identical provision for claims against guarantors.

Having been served with a notice under sub-section 3, the defendants denied liability on the ground that no notice had been served on the original lessee under sub-section 2. Accordingly, their defence rested on the trite proposition that you cannot sue a guarantor without showing an unsatisfied liability on the part of the alleged principal debtor.

Notwithstanding that the possibility (no more) of such a defence had been canvassed by Mr Justice Millet in City of Westminster Assurance Company v Registrar of Companies (unreported 28 June 1996), the argument was rejected. It was held that the somewhat elaborate arrangement of the relevant provisions into two sub-sections was itself a sufficient indication that claims against lessees and guarantors should be subject to separate procedural codes; and for that reason the operation of sub-section 3 was not intended to be subject to compliance with sub-section 2.

Thus construed, the section allowed for the welcome conclusion that Parliament did not truly intend the landlords to take the seemingly pointless step contended for by the defendants.