Has the UK court created a lease guarantee nightmare?

Abstract

Purpose

The purpose of this paper is to highlight the practical difficulties resulting from the UK Court of Appeal's recent guidance on the effect of anti‐avoidance provisions in the Landlord and Tenant (Covenants) Act 1995.

Design/methodology/approach

The paper analyses the Court's guidance, focusing on the inability of a guarantor to take a valid assignment of a lease from the outgoing tenant.

Findings

The paper identifies significant implications for due diligence, valuation and pricing of property investments, arguing that the result could be to deprive landlords of access to covenant strength that is crucial to its valuation or to any sale price.

Originality/value

The paper reflects practitioner discussions since the Court of Appeal gave its ruling in K/S Victoria Street v. House of Fraser. It highlights significant new issues that must be factored into property due diligence.

Citation

Dowden, M. (2012), "Has the UK court created a lease guarantee nightmare?", Journal of Property Investment & Finance, Vol. 30 No. 1, pp. 83-87. https://doi.org/10.1108/14635781211194827