An Authorised Guarantee Agreement (AGA) is a legal document that is commonly used in the UK`s property sector. It is a legally binding agreement between a landlord and a tenant that transfers certain responsibilities to the tenant. In this article, we will explore when an Authorised Guarantee Agreement is required.
An AGA is usually required when there is a transfer of a leasehold property from one tenant to another. This typically happens when a tenant wants to sell their business, sublet a property, or assign the lease to another party. In such cases, the new tenant becomes responsible for fulfilling the obligations under the lease agreement.
However, the landlord may still require some form of assurance from the outgoing tenant that the new tenant will comply with the lease requirements. This is where an AGA comes into play. It is a legally binding agreement that ensures that the outgoing tenant guarantees that the new tenant will fulfill the obligations under the lease agreement.
When a tenant assigns a lease to a new tenant, they effectively transfer their rights and obligations to the new tenant. However, the outgoing tenant`s liability under the lease agreement does not end just because they have assigned the lease. Instead, they continue to remain liable for the obligations under the lease agreement.
Therefore, an AGA is required to ensure that the outgoing tenant guarantees that the new tenant will fulfill the obligations under the lease agreement. The AGA creates a contractual relationship between the landlord and the outgoing tenant, which means that the landlord can pursue the outgoing tenant if the new tenant fails to fulfill their obligations.
In some cases, the landlord may not require an AGA. For example, if the lease agreement already contains a clause that specifies the outgoing tenant`s liability and obligations, the landlord may not need an AGA. Similarly, if the new tenant is a reputable business with a good track record of fulfilling its obligations, the landlord may not require an AGA.
In conclusion, an Authorised Guarantee Agreement is required when an outgoing tenant assigns a lease to a new tenant. The AGA ensures that the outgoing tenant guarantees that the new tenant will fulfill the obligations under the lease agreement. However, it is important to note that the need for an AGA will depend on the specific circumstances of each case.