Guarantors: guaranteeing they stay ‘on the hook’
A recent High Court case serves as a timely reminder to landlords that if there is a surety to the lease they must be consulted in relation to any proposed variations if they are to remain liable for the tenant’s obligations. Topland Portfolio No 1. Ltd v Smiths News Trading Ltd  EWHC 1445 (CH) upholds a simple rule established in the 19th century that where a guarantee has been given any subsequent amendments to the primary underlying contract will discharge the guarantor’s liability under the guarantee, unless: the guarantor has consented to the variation; or the variation is clearly insubstantial or incapable of adversely affecting the guarantor.
The tenant in this case was a company in the WH Smith’s group (although not WH Smith itself). It entered into the lease in question in 1981. The company now known as Smiths News Trading was a party to that lease as guarantor. In 1987, the tenant carried out an extension and alterations to the subject premises pursuant to a licence to alter agreed with the landlord. Smiths was not a party to that licence…
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