Commercial authorised guarantee agreement

[chris1]

I am assigning the remainder of a 10 year commercial lease (7yrs to run) and have been asked to enter an authorised guarantee agreement.Whilst the normal rent liability term is up to 6 months, in this case the landlord is requesting the whole of the remaining term from default/bankcruptcy etc. Can I insure against the assignee defaulting and me becoming liable and if so where would I get quotes for such insurance

kind regards
Chris

[Andrewgadd]

Hello Chris
I'm not a great expert on leases - just had a few.

I would think, that as the landlord is asking you to sign this authorised guarantee agreement, it isn't in the lease you signed three years ago. If it isn't in the lease, and you don't HAVE to sign it, then don't. You might want to ask the landlord why you should enter this new agreement. (Ask by letter / email so you get the answer in writing.)

However, leases and the whole legal frame work, is so full of legalese, jargon and rabbit holes, I would really suggest you contact a solicitor that is familiar with lease law, and let him/her take a look at the lease you signed three years ago.

Hope this helps.

[chris1]

Andrew
Thank you, I can't avoid the guarantee agreement as this is now common place with assignments of leases created after 1995 I think, The problem is the "rent liability term" normally 6 months, this guy wants the full remaining term guaranteed from the default date, whenever that may occur.

apparently this cannot be construed as "withholding consent unreasonably" so I think I have to go with it, what I want to know is can I insure against a claim by the landlord and where would go for a quote.

kr Chris

[Andrewgadd]

Chris
What does your original lease say about the rent liability term?
All I'm saying (I guess) is that you are committed to anything you have already signed. But if the landlord wants you to sign something new - why? If the original lease (that you signed) committed you to a 6 month rent liability term, then that's what you are committed to. If the landlord wants 'full remaining term' - then it's something new. So, why do you have to sign this new document?

Andrew

[SetterFan]

Hi

I've not had any direct experience of commercial leases, but I recently saw an article that may be of some help to you. http://www.bcentral.co.uk/startingup/premises/getting-out-of-a-lease.mspx

Revisiting it, it struck me that if you're going to end up with liability or paying an expensive insurance premium, maybe sub-letting to the new tenant might be an option for you.

I can imagine the insurance premium being fairly stiff, and have to agree with the other Andrew that you need to consider all the options open to you in your original lease contract.

Regards

Andrew M

[Andrewgadd]

Hello - the first Andrew again.
Guess I misunderstood you original question. I had assumed that you were going to find someone to sub-let to. This is standard in commercial leases. The sub-tennant pays you, and you pay the landlord. If the sub-tenant wants to quit, they they find a sub-sub tenant. and so on. The rent money works its way up the chain until it finds you, and you pay the landlord. The constant worry is that one sub-sub (etc) tenant fails to pay, and the chain breaks down. But as your name was first on the list, you still have to pay the landlord.
I've only had to quit a lease once, and rather than find a new tenant, I approached the landlord, and after a bit of haggling, I bought my way out of the lease. Cost me thousands (of £) but at least I could put it all behind me, worry about my business and not play at being landlord - collecting rent etc.
It might be an option you wish to consider.
Aslo, when you get to the next lease, make sure you go for something short term. One to three years is considered normal in small businesses.

[chris1]

Well firstly, thank you for all your concern and replies, it is refreshing to know that there are people out there that actually care about others and will spend time trying to help, I know that makes me sound very old fashioned but thanks anyway.

I am checking out my original lease but believe, knowing the landlord he will have covered his back all ways. My circumstances, to be clear are, I took a new lease (10yrs - 3 remaining) I have a purchaser for the lease and the business, a very successful specialised chocolate shop/cafe and ice cream parlour.

The buyers are known to me as I sold them them my other business earlier this year, I have every confidence in both them and the business however, as we all know, anything can happen.

The assignment has been agreed by all parties subject only to my complying with the landlords request for "FULL TERM LIABILITY" on the guarantee agreement. The rest of the guarantee agreement is fairly standard, in line with most leases after 1995/6. Completion paperwork is being signed tomorrow by all parties and held to my order subject to me covering my back with a policy of some sort, this is where my problem is, I dont know who to approach for a quote or if such policies exist! I know the premium may be high but so is my car insurance, although not so bad when you consider the value of the car, all I want is peace of mind for a reasonable cost.

Thanks again and I look forward to hearing further.

kr Chris

[Andrewgadd]

Chris
Hey, if helping others is old fashioned, I guess I'm old fashioned! Do unto others etc.

OK, if you want insurance cover, I'm not really the person to ask. (Not being an expert in insurance!) However, I've located a few web sites that specialise in business insurance, and I've provided the links below. Also (of course) if it's all going to happen tomorrow, you haven't given yourself much time to sort things out.

http://www.bizhelp24.com/commercial_insurance/commercial_insurance_portal.htm

http://yahoo.xbridge.com/main?__action=dorfq&vid=26&tab=welcome

http://chadwell.apcinsure.co.uk/apcinsure/

http://www.insurancewide.co.uk/about_us.html

I'm going to repeat myself here, but if you can't sort out the required insurance in the time, could you not appoach the landlord and ask if you can buy yourself out of the responsibility? Remember, this will be you offering to give the landlord money, so he should (at least) give it some thought.

Sorry I can't be more help, but p[lease let me know what happens.

Regards