Q A draft lease in favour of Shellco requires the making of an authorised guarantee agreement (AGA) before the lease can be assigned. Shellco’s obligations under the lease will be guaranteed by its parent company, Mumco. Can the landlord validly require that Shellco’s obligations under any AGA will also be guaranteed by Mumco?
A Nobody knows for sure, there being a sharp division of opinion on whether stipulating for a parallel guarantee would offend the anti-avoidance provisions of the Landlord and Tenant (Covenants) Act 1995. The arguments are carefully analysed by Bruce Dear, of Klegal, who argues that nothing short of remedial legislation will get the property investment industry out of an awkward corner: see Time for clarity in AGA saga Estates Gazette 21 October 2000, p167.
