What is an Authorised Guarantee Agreement?
An Authorised Guarantee Agreement (also known as an AGA) is a document that a Landlord may require the existing tenant (the Assignor) to sign during a lease assignment, to safeguard the Landlord’s position should the incoming tenant (the Assignee) fail to comply with the terms of the lease. The Assignor signs an Authorised Guarantee Agreement with the Landlord to guarantee the Assignee’s performance of the lease obligations.
If the Assignee fails to perform the tenant covenants in the lease (not just timely payment of rents but also such things as repair obligations, etc.) the AGA allows the landlord to pursue the outgoing Assignor under the terms of the AGA. An AGA may also provide the landlord with the option to insist on the Assignor taking on a new lease (on the same terms of the existing lease) if the new tenant defaults.
The code for Leasing Business Premises in England and Wales 2007 (Lease Code 2007) recommends that an AGA should only be required if, at the date of the assignment, the new tenant is of lower financial standing than the outgoing tenant or is a resident or registered overseas.
It may be that a rent deposit paid by the incoming tenant, rather than an Authorised Guarantee Agreement from the existing tenant, would satisfy a landlord.
When does an AGA end?
The Assignor’s liability under the AGA will come to an end when the Lease term expires or when the Assignee assigns the Lease to a third party (whichever happens first).
