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Ash, Solicitor
Category: Property Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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Last year, in early 2014, I set about purchasing a leasehold

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Last year, in early 2014, I set about purchasing a leasehold business. The business was advertised as having 9 years remaining on the lease with a rental figure of £7800 per annum.
The leaseholder at the time had - temporarily, I’m told - negotiated this down to £6500 per annum, was paying cash in hand, and refused to pay after the numerous times the premises was broken into. I am unaware of the nature of his relationship with the landlord, but it would seem to me as though they were very lenient with him. He was the original leaseholder of the business (it had only been in existence for two years at the time).
After having made an acceptable offer on the property, the leaseholder’s solicitor advised mine that the leaseholder was “not able to locate the lease”. Following this, the landlord’s solicitor also advised mine that the landlord had “mislaid his client’s part of the lease”. The landlord agreed to a surrender and regrant, meaning a new lease had to be drawn up.
I have now sold the leasehold property on, and in doing so, became aware of a clause which requires that I must sign an authorised guarantee agreement to assign the lease. This agreement imposes principal debtor liability on me, meaning that I am responsible for covering any debts which the assignee builds up with the landlord.
Had I been aware that in drawing up a new lease I would be subject to such a condition, I would not have purchased the business (at least, not if such a clause were to be in existence). It now also seems far-fetched that the tenant, landlord and their respective solicitors were unable to locate the lease, or a copy of it, to assign.
I feel as though I have fallen into a trap and the apparent “misplacement” of the previous lease seems excessively convenient. The previous leaseholder was eager to be out ASAP. Am I to believe that neither his nor the landlord’s solicitor held a copy of the original lease, either? Why go to the length and expense of drawing up a new lease if an easier option was available - unless it was to protect the previous leaseholder?
I do not want to responsible for any future mismanagement of a business I have sold on. What can I do?
Hello my name is ***** ***** I will help you with this.
I assume the person you purchased it from would have also been liable for you?
Customer: replied 2 years ago.

Hi Alex, good to meet you.

I would assume so, though not having seen the original lease, I cannot be sure. The “loss” of the lease benefits the landlord either way, though in the event the previous leaseholder would not have been liable its “loss” would solely benefit the landlord, which makes me assume that both parties had something to gain by losing it.

Do you know whether it was 'lost' on purpose?
Customer: replied 2 years ago.

I do not - however, given the circumstances, I find it unlikely that it could have been coincidental. What are the chances of the landlord, tenant and both their solicitors being unable to locate a lease - or a copy - which had only been drawn up two years previously?

On what basis are they saying you are bound now if the original one couldnt be found?
Customer: replied 2 years ago.

The landlord agreed to a surrender and regrant, meaning a new lease was drawn up for me when purchasing the property.

And there was nothing meaning you are liable in this new lease?
Customer: replied 2 years ago.

There is a clause which states that a condition of the landlord giving his consent to assign is that I must enter an authorised guarantee agreement which places principal debtor liability on me. This is the relevant section:

"1.1 The Tenant shall not assign the whole of this lease without the consent of the Landlord, such consent not to be unreasonably withheld.

1.2 The Tenant shall not assign part only of this lease.

1.3 The Landlord and the Tenant agree that for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 the Landlord may give its consent to an assignment subject to all or any of the following conditions:

(a) a condition that the assignor enters into an authorised guarantee agreement which:

(i) is in respect of all the tenant covenants of this lease;

(ii) is in respect of the period beginning with the date the assignee becomes bound by those covenants and ending on the date when the assignee is released from those covenants by virtue of section 5 of the Landlord and Tenant (Covenants) Act 1995;

(iii) imposes principal debtor liability on the assignor;

(iv) requires (in the event of a disclaimer of liability of this lease) the assignor (or former tenant as the case may be) to enter into a new tenancy for a term equal to the unexpired residue of the Contractual Term; and

(v) is otherwise in a form reasonably required by the Landlord; and

(b) a condition that a person of standing acceptable to the Landlord enters into a guarantee and indemnity of the tenant covenants of this lease in the form reasonably required by the Landlord (but with such amendments and additions as the Landlord may reasonably require).

1.4 The Landlord and the Tenant agree that for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 the Landlord may refuse its consent to an assignment if any of the following circumstances exist at the date of the application of the Tenant for consent to assign the lease:

(a) the Annual Rent or any other money due under this lease is outstanding or there is a breach of covenant by the Tenant that has not been remedied; or

(b) in the reasonable opinion of the Landlord the assignee is not of sufficient financial standing to enable it to comply with the covenants of the Tenant and conditions contained in this lease; or

(c) the assignee and the Tenant are group companies within the meaning of section 42 of the LTA 1954.

1.5 Nothing in this clause 19 shall prevent the Landlord from giving consent subject to any other reasonable condition, nor from refusing consent to an assignment in any other circumstance where it is reasonable to do so."

Ok. So you knew about the guarantee before you signed itz.
Customer: replied 2 years ago.

No - the lease is 40 pages long, I'm not a solicitor, and I'd never heard of an authorised guarantee agreement. I looked over the lease but didn't pore over all 46 clauses in detail (and even if I had done, there's plenty I wouldn't have understood). I would not knowingly have signed such a contract.

Did you have a solicitor acting for you?
Customer: replied 2 years ago.

Yes, I did.

Did your solicitor point it out?
Customer: replied 2 years ago.

No, he didn't. When my landlord informed me that I'd be responsible for paying the rent if the assignee failed to do so, I rang him and enquired about the matter. He said that such clauses were common with new leases and that I could take out insurance.

Ok. Then if you signed if you appear to be bound, however Your solicitor should have informed you. This is because your solicitor owes you a duty of care to inform you of anything that should be brought to your attention. If not the solicitor could be negligent.
This means if a tenant does default and you are liable, you could make a claim for that sum against your solicitor. The solicitor seems negligent not informing you, but sadly you are liable as you signed the document.
I am sorry if this is not the answer you want and certainly not the one I want to give you, but I have a duty to be honest,
Can I clarify anything for you about this today please?
Ash and other Property Law Specialists are ready to help you
Customer: replied 2 years ago.

Thank you for your help - there's nothing which needs clarifying.

I think I will start looking into insurance and claim the sum from my solicitor.


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