Guarantors: Commercial Property

Having a Guarantor is not a guarantee to getting paid in circumstances of tenant breach. Just ask the commercial landlord of Gordon Ramsay!

Mr Ramsay was the Guarantor of a commercial lease of restaurant premises. He argued that he had not personally signed the guarantee and therefore, it was not enforceable. The guarantee was executed using an electronic signing machine, which imprinted a copy of Mr Ramsay’s signature. Mr Ramsay tried to argue that as he had not personally signed, he was not liable under the guarantee. He lost.

A couple of other points to bear in mind:

1. Variations

Primarily, the guarantor is guaranteeing the tenants obligations for rent and indemnifying the landlord for any tenant’s breach(es). During the term of a commercial lease it is not uncommon for the tenant’s obligations to be varied. Please note that unless the guarantee is expressed to cover any variation, or the guarantee is similarly varied at the same time as the lease, the guarantee may become unenforceable.

2. Disclaimers

In circumstances where a liquidator, or trustee in bankruptcy disclaims a commercial lease, a guarantor may still find be liable. A well drafted commercial lease will present the landlord with a choice of remedy, in circumstances of tenant insolvency: either to accept a lump sum referable to the rent, or to call on the guarantor to take a new lease of the residual term
In these circumstances, legal advice must be taken, as strict time limits often apply to these remedial choices; also, unless the 1954 Act has been excluded from “the new lease”, landlords need to be aware that the protection afforded to tenants under the 1954 Act can come into play by default.

If you have any queries concerning the matters raised please contact Patrick Lees, Senior Solicitor on 020 8567 3477 or e-mail plees@prince-evans.co.uk