How to Review an Authorised Guarantee Agreement on a Commercial Lease in England

Section 5 of the Landlord and Tenant (Covenants) Act 1995 would release an assignor of the whole from the tenant covenants as from a lawful assignment. An authorised guarantee agreement then makes that assignor guarantee the immediate assignee. Open the draft beside section 16, mark what it does, and narrow or walk before you complete.

Section 5(2) releases the tenant as from an assignment of the whole. Section 16 then allows an authorised guarantee of the assignee. On a consent assignment, that deed is the release condition, not a formality.

Hanley Wheel Ltd holds Unit 4 at Hope Street Pottery under a lease dated 1 March 2021 (English law; courts of England and Wales). Tegan, who runs operations at the eight-person stoneware studio, wants to assign the whole to Canal Side Cafe Ltd. The 6 October 2026 draft licence carries Schedule 2. The 9 October Slack treats section 5 as a clean break. Decision: Friday 17 October 2026.

Disclaimer: Checkory provides AI support, not legal advice. Consult a qualified lawyer for binding decisions.

What section 16 allows an AGA to do, and why section 5 is not the whole story

Section 16 exists because section 5 would otherwise release the assignor. Where the Act releases a tenant covenant on assignment, nothing in the Act — including section 25 — prevents an authorised guarantee of the assignee if section 16 is met.

Under section 16(2)–(3), an AGA guarantees the assignee's relevant covenant where consent is given subject to a lawfully imposed condition that the tenant enter into such an agreement, and in pursuance of that condition. Section 16(4) sets the limit: not an AGA to the extent it guarantees anyone other than the assignee, or imposes liability after that assignee is released by the Act. Section 16(5) allows sole or principal debtor wording and a new tenancy on disclaimer no longer or more onerous than the assigned tenancy.

On these facts the 1 March 2021 lease is a new tenancy under section 1 (commencement 1 January 1996 under the commencement order). An assignment in breach stays excluded under section 11. Alienation consent is covered separately in the commercial lease alienation guide; this page deals with the guarantee deed.

When this lease lawfully conditions consent on an AGA

A landlord cannot require an AGA that sits outside the lease and the statute. Section 16(3) needs a consent condition that is lawfully imposed. On a qualifying lease, section 19(1A) of the Landlord and Tenant Act 1927 lets the parties agree circumstances or conditions for consent to assignment; the landlord is not unreasonable merely for imposing a listed condition.

Clause 5.2 is a qualified assignment of the whole. Clause 5.3 lists unpaid sums as a withhold circumstance and an AGA as a section 19(1A) condition. The 6 October draft licence pursues that condition with Schedule 2, so the landlord is not inventing the AGA outside the lease. Scotland and Northern Ireland are outside this England and Wales guide.

How long liability lasts — next assignment, term end, holding over, and whichever-is-later words

Market drafting usually treats AGA duration as ending on a further lawful assignment by the assignee or at term end. Section 16(4)(b) ends liability after that assignee is released by the Act. A chain that names later tenants is not a valid authorised guarantee to that extent.

Schedule 2 defines Term to include continuation and holding over, then continues until Term end or any further assignment, whichever is later. Those words conflict with subsection (4)(b) if they outlast Canal Side's release. In practice, 1954 Act holding over extends exposure when the AGA includes it — mark those words before Friday.

Which covenants sit inside section 16(5), and GAGA versus a void direct guarantee

Schedule 2 covers rents and all tenant covenants, principal-debtor style, plus a new tenancy on disclaimer. Those limbs can sit inside section 16(5) if they stay no more onerous than that subsection allows. Mark whether Schedule 2 stays inside that limit.

Treat a GAGA as a guarantee that the assigning tenant complies with its AGA — the form paragraph 6.2 of the RICS Code contemplates when the landlord reasonably requires it. Do not treat licence clause 4 as that GAGA. Clause 4 asks Gethin Pryce to guarantee Canal Side Cafe Ltd directly as a primary obligor. That matches the Good Harvest pattern, not a guarantee of Hanley's Schedule 2.

In Good Harvest Partnership LLP v Centaur Services Ltd [2010] EWHC 330 (Ch), requiring a guarantor of the tenant to guarantee an assignee can frustrate the Act's release and be void under section 25. Use that when reading this draft; it is not a finding on every GAGA. A holding-company see-to-it on a vendor MSA is a different instrument in the parent company guarantee review.

How reasonableness, deposits, and assignee strength still matter

Where clause 5.3 already lists an AGA, mark Schedule 2's form, whether "reasonably require" still constrains the ask, and whether a rent deposit or incoming guarantor can be offered instead. RICS paragraph 6.2 frames those options if the landlord reasonably requires them. Guidance only — it does not remove clause 5.3.

Canal Side Cafe Ltd was incorporated on 14 July 2026 and has no filed accounts. That thin covenant supports the landlord's ask; it does not set a deposit amount. Under section 17, fixed-charge claims against a former tenant under an AGA need notice within six months — note that if a notice arrives.

First-pass marks before you assign — narrow, substitute, wait, or walk

Make the marks before Friday 17 October 2026. A first-pass — a quick extract before a full read — sits beside the Slack. The 9 October note contradicts each checklist row below. Verify duration and GAGA limbs, then negotiate: narrow Schedule 2, substitute security, wait, or walk.

Narrow the AGA to the immediate assignee, mark holding over, and refuse a void direct guarantee of the assignee. Offer a deposit or incoming guarantor only if the lease allows. Wait for a revised licence, or walk. Use document analysis and the commercial lease review tool for a first look. You still choose the path. A qualified lawyer makes the binding call.