Old Leases — Pre-1996 Position
Common law privity of contract: original tenant remains personally liable under tenant's covenants (including rent) for full lease term — regardless of how many times the lease has been assigned. Former tenant liability: each former tenant who assigned with landlord's consent also remains liable. Guarantor exposure: corresponding full-term exposure. s.17 L&T(C)A 1995 (applies to old AND new leases): landlord must serve prescribed form notice on former tenant/guarantor within 6 months of fixed charge becoming due — failure bars recovery of that sum permanently. s.19 overriding lease: former tenant who pays under s.17 can call for overriding lease — steps in as mesne landlord; can forfeit undertenant; mitigates future exposure.
New Leases — The 1995 Act Regime
L&T(C)A 1995 applies to leases granted on or after 1 January 1996 ('new leases'). Automatic release: outgoing tenant automatically released from burden of tenant's covenants on lawful assignment (not unlawful assignment in breach of no-assignment covenant). s.8 notice: tenant serves notice on landlord before or within 4 weeks after assignment applying for release from landlord's covenants; if no counter-notice within 4 weeks, release automatic. Landlord release: landlord also automatically released from landlord's covenants on lawful transfer of freehold reversion; same s.8 notice procedure. Anti-avoidance: s.25 — agreements purporting to exclude tenant's right to release are void.
Authorised Guarantee Agreements (AGA)
AGA (s.16 L&T(C)A 1995): outgoing tenant guarantees performance of tenant's covenants by the immediate assignee — and only the immediate assignee. Permitted pre-condition: landlord can require AGA as condition of consent to assign new lease where lease contains no-assignment-without-consent covenant; requirement must be reasonable. Release of AGA guarantor: when immediate assignee reassigns the lease (with landlord's consent), the AGA guarantor is automatically released from liability for that subsequent assignee's obligations. Direct covenant: AGA may also include a direct covenant by outgoing tenant to observe/perform tenant's covenants during immediate assignee's occupation. Guarantor of AGA: landlord can require guarantor of the AGA — but same limitation (immediate assignee only; released on reassignment).
Section 17 Notices — Both Old and New Leases
s.17 L&T(C)A 1995 applies to both old and new leases. Prescribed form notice required: landlord must serve on former tenant/guarantor within 6 months of fixed charge (rent; service charge; other liquidated sum) becoming due. Six-month bar: failure to serve within 6 months = right to recover that charge permanently lost; no extension. Prescribed form: must use the form prescribed by the 1995 Act and regulations; failure to use prescribed form may invalidate notice. Practical importance: landlords must maintain records of all former tenants and their contact details for the full lease term; serve s.17 notices promptly on default.
Scotland and Practical Implications
Scotland: L&T(C)A 1995 does not apply; Scots law governs; default position — original tenant generally not liable for rent accruing after date of assignment (contrasting with pre-1995 English common law). Specific lease terms: express personal liability covenants in Scottish commercial leases may modify the Scots law default; take Scottish specialist legal advice. Pre-1996 English lease holders: any business that assigned an English commercial lease before 1 January 1996 retains potential exposure for the full remaining term — check with specialist commercial property solicitors. Due diligence: before accepting assignment of old lease, take advice on former tenant liability profile. Negotiating release: on assignment of old lease, parties may agree to release former tenants — requires formal documentation.