Assignments to guarantors are void

United Kingdom
16/03/2016
Download PDF

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

The 2011 Court of Appeal decision in K/S Victora Street v House of Fraser (Stores Management) Ltd was of considerable importance to the property industry because it clarified a number of issues under the Landlord and Tenant (Covenants) Act 1995 relating to the release of lease covenants on an assignment of a lease, but it also raised an important question.

In K/S Victoria, Lord Neuberger (now President of the Supreme Court) suggested the anti-avoidance provisions in the Act would make an assignment of a lease to a tenant's guarantor void, but this comment did not form part of the court's decision in the case.

Since then, the property industry has been waiting to see if the courts would follow Lord Neuberger's suggested approach to this issue or take another tack.

Sitting in the High Court, Amanda Tipples QC has followed Lord Neuberger's approach and confirmed in a detailed judgment today (in the case of EMI Group Ltd v O&H Q1 Limited) that the anti-avoidance provisions in the Act prohibit a tenant from assigning its lease to its guarantor, because this would frustrate the purpose of the Act.

Although this decision is not binding on other courts (and may be subject to appeal), it suggests the courts are following the approach suggested in K/S Victoria and landlords should consider whether any of the leases of their premises may be affected by this decision.

Search Filters

Advanced Search

Key contact

Related content

  • 24/04/2024

    CMS Banking Disputes Report 2024

    Working with litigation analytics company, Solomonic, CMS has published its Banking Disputes Report 2024, a data-driven review of the Banking and Finance sector’s dispute-related activity to identify key trends, how banking disputes are being determined...
  • 18/04/2024

    Transparency: ECCTA 2023 and Register of Overseas Entities update

    The Economic Crime and Corporate Transparency Act 2023 (ECCTA), which is aimed at tackling economic crime and preventing abuse of corporate structures in the UK, will not only fundamentally reform the administrative requirements for UK companies, limited...
  • 17/04/2024

    APP fraud – Quincecare duty claims against banks replaced by new “retrieval duty” claims

    The recent decision in CCP Graduate School Ltd v National Westminster Bank plc and another [2024] EWHC 581 (KB), demonstrates how Claimants are repositioning claims against banks arising from authorised push payment (APP) fraud from breach of Quincecare...