An authorized guarantee contract (also called AGM) is a document that a landlord can ask the existing tenant (the agent) to sign during a tenancy to ensure the landlord`s position if the incoming tenant (the agent) does not comply with the terms of the tenancy agreement. The agent signs with the lessor an authorized guarantee contract to ensure the execution of the rental obligations by the agent. A recent High Court decision in the Co-Operative Group Food Ltd/. A-A Shah Properties Ltd (2019) refers to a dispute in the approved guarantee agreement (AGM), in this case an agreement involving a guarantor of the outgoing tenant. In limited circumstances, the approved guarantee contract goes beyond a second assignment – z.B if you did not obtain the agreement of the lessor before the award of the lease. In this case, your liability for the contract would last until the next assignment authorized by the owner. In other limited circumstances, the contract may be terminated before the usual expiry date, for example. B if the lessor is in violation,. B for example, a substantial change in the lease that is made without the part of the deposit. With an „old“ lease, the original landlord and the original tenant are required to fulfill all the obligations of landlord and tenant for the duration of the lease, even if they transfer their interests to someone else. This principle is called „contract privilege.“ For example, an original tenant who awarded his tenancy agreement a few years earlier could, because of the current tenant`s default, be charged unpaid rent or to meet other tenant obligations, and he or she would have to pay or fulfill those obligations. This was considered particularly distressing for tenants and considered excessive protection of landlords.
As a result, the 1995 Act decided to release tenants and third parties from their assignment obligations. It is important for a tenant to carefully enforce a tenancy agreement with a condition of the AGM, because if they do not comply with their obligations, they could be brought to justice, risk fines or even, in some cases, be sued. If the agent fulfills the leases in the lease agreement (including the payment of rent and repair obligations), the AGM authorizes the lessor to sue the outgoing tenant in accordance with the terms of the AGM. An approved guarantee contract is a specific form of guarantee that applies specifically to lease agreements concluded from 1996. Tenants may agree with the landlord that an AGM is only required if the above factors are relevant. Alternatively, a tenant may attempt to negotiate that each lease expressly states that an AGM is made available only if it is „appropriate in the circumstances“ at the time of the transfer. Without the adequacy formula in a tenancy agreement, a lessor may insist that the outgoing tenant be subject to an AGM as a precondition for the landlord`s consent to an assignment, even if the federal force and the financial position of the agent are more important than those of the outgoing tenant. If a premium is paid for the lease or if the lease is to be sold as a current business on the premises, few tenants seem, in my experience, too concerned about the long-term risk of default of the taker.
In the end, in Coop, on the sole basis of a provision of the transfer licence, the AGM was retained in that complaint as an enforceable partial guarantee. Although there was some confusion with respect to the terms of the transfer licence, the High Court found that the licence guarantee in the case of the co-operative group, which was considered a partial guarantee and that the surety was not exempt from liability.