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Has the UK court created a lease guarantee nightmare?

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  • Malcolm Dowden

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 inK/S Victoria Streetv.House of Fraser. It highlights significant new issues that must be factored into property due diligence.

Suggested Citation

  • Malcolm Dowden, 2012. "Has the UK court created a lease guarantee nightmare?," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(1), pages 83-87, February.
  • Handle: RePEc:eme:jpifpp:v:30:y:2012:i:1:p:83-87
    DOI: 10.1108/14635781211194827
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