The great escape: guarantor released from liability by grant of licence for alterations

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In Topland Portfolio No 1 Ltd v Smiths News Trading Ltd [2013] EWHC 1445 (Ch), the High Court has held that a guarantor to a lease was discharged from its obligations when the landlord and tenant agreed a licence for alterations without joining the guarantor as a party or seeking its consent. The licence allowed the tenant to carry out significant works to the premises, which had the effect of increasing the potential liability for repairs. As this was more onerous and thus prejudicial to the guarantor, it operated as a release from the guarantee.

The premises were let to the tenant pursuant to a lease granted in 1981. The tenant’s obligations under the lease were guaranteed by the defendant (then known as WH Smith & Son Ltd).

In 1987, the landlord and the tenant entered into a licence for alterations. This licence provided for extensive works to be undertaken at the premises and contained the right for the landlord to require reinstatement at the end of the term. The defendant was not asked to consent to this, nor was it a party to the licence…

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