Repeat Transfer Guarantee

The Court of Appeal has held that an assignment clause in a lease that required, as a condition of the landlord’s consent, a guarantee from the outgoing tenant’s guarantor, should be interpreted as a simple qualified covenant against assignment.

The condition requiring the new guarantee (which was void under section 25 of the Landlord and Tenant (Covenants) Act 1995 (LTCA 1995)) and a second condition requiring the tenant to give notice to the landlord were interdependent and should both be severed. This meant that the assignment provision could operate as a qualified covenant against assignment.

Section 25 of the LTCA 1995 was not intended to invalidate more of a lease than was necessary to safeguard the objectives of the LTCA 1995 in the context of the assignment under consideration.

However, the court could consider the structure of the contract objectively and with common sense so as to avoid an arbitrary result that provided a windfall to one of the parties.

(Tindall Cobham 1 Ltd and others v Adda Hotels (an unlimited company) and others [2014] EWCA Civ 1215.)

Written by James Naylor

Partner, CG Naylor LLP.