Home and Housing
Authorised Guarantee Agreement - what is it and how does it work?
Summary
An Authorised Guarantee Agreement (AGA) is a form of guarantee where an existing tenant of a commercial lease agrees to guarantee the tenant’s obligations if he/she/they transfer the lease part way through. It is common for the lease terms to provide that the outgoing tenant must enter into the AGA. Notwithstanding this, it may be possible to still negotiate the terms. An AGA acts as a safety net for landlords, offering an additional layer of security in case the new tenant (assignee) defaults on their lease obligations. We are experienced in advising tenants, landlords, and assignees, whether the situation is on the grant of a new lease, assignment or dipsute. We regularly :- * Draft, review, and negotiate AGAs (and the underlying lease) * Advise on the legal implications, risks, and responsibilities for outgoing tenants, incoming tenants taking an assignment, and landlords * Guide negotiations between the existing tenant and potential assignee, including agreements on indemnity and liability. * Support landlords in ensuring continuity of rent and lease obligations * Assist with resolving disputes or claims under an AGA Generally, a landlord cannot refuse consent to an assignment.
Key information
- Draft, review, and negotiate AGAs (and the underlying lease)
- Advise on the legal implications, risks, and responsibilities for outgoing tenants, incoming tenants taking an assignment, and landlords
- Guide negotiations between the existing tenant and potential assignee, including agreements on indemnity and liability.
- Support landlords in ensuring continuity of rent and lease obligations
- Assist with resolving disputes or claims under an AGA
- Risk assessment by the landlord \- the landlord will consider the financial strength of both the assignor and assignee, the complexity of the lease, and the length of the remaining lease term.
- Negotiation between the parties \- the outgoing tenant and landlord can negotiate whether an AGA is necessary and, if so, the terms of the agreement.
- Alternative Guarantees \- explore alternative forms of security for the landlord, such as a rent deposit or guarantor from a third party.
- Guarantee obligations \- Guarantor's promise to perform the tenant's lease covenants if tenant defaults. Usually includes payment of rent and other sums due. Often includes obligation to take new lease if original lease terminated.
- Duration and scope \- when guarantee becomes effective, how long it lasts.
- Which specific obligations are guaranteed \- whether it covers just rent or all lease obligations.
- Guarantor restrictions \- prevention of release without landlord consent. Restrictions on guarantor's ability to take security from tenant and limitations on guarantor's rights of subrogation.
Practical guidance
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Sources
This is signposting information from the Legal Shaman wiki, not legal advice. Always consult a qualified solicitor for your situation.