Is my guarantor still on the hook?

By Nick Wood

The Court of Appeal has confirmed that the rule concerning release of guarantors created by an 1878 case remains good law. Landlords run the risk of releasing a guarantor if a lease is varied or altered (where such change is not contemplated by the original contract), without the approval of the guarantor.

In managing portfolios, landlords should: consider carefully whether or not a guarantor should be consulted (and brought in to any contractual variation or alteration) whenever the obligations in a lease are altered or varied, however informally; evaluate portfolios of assets to ascertain whether there is any risk in respect of existing guarantees; and be aware that there is only a limited exception to the general rule. Only if it is immediately apparent (without enquiry) that an alteration or variation is unsubstantial, or that it can only be beneficial to the guarantor, will the guarantee remain in force if there is a variation to the principal contract…

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