What Is the Purpose of an Authorised Guarantee Agreement

An authorised guarantee agreement, or AGA, is a legal document that is used in the context of commercial property transactions. Specifically, an AGA is a mechanism that is put in place to ensure that a tenant who assigns their lease to a new tenant continues to be liable for the rent and other obligations of the lease, even after they have transferred their interest.

The purpose of an AGA is to provide assurance for landlords that they will continue to receive rent payments and other lease obligations from the tenant, even if the tenant assigns the lease to someone else. This is important for landlords because they rely on these payments to maintain their investment and meet their own obligations.

The AGA works by obligating the original tenant to guarantee the performance of the new tenant. Therefore, if the new tenant defaults on their lease obligations, the landlord can pursue legal action against the original tenant to recover any losses. This ensures that the landlord is not left without recourse if the new tenant cannot or will not pay.

From the perspective of the new tenant, an AGA can be seen as a barrier to entry, as it may deter them from taking on the lease in the first place. However, it is important to remember that the AGA does not mean that the original tenant is automatically liable for the full term of the lease. It only applies to the obligations of the new tenant during the period of their occupation.

It is worth noting that an AGA is not always necessary or appropriate in every commercial property transaction. However, if one is required, it is essential to take the time to ensure that it is drafted correctly and that all parties understand their obligations. This can help to avoid disputes and legal action down the line.

In conclusion, the purpose of an authorised guarantee agreement is to provide assurance for landlords that they will continue to receive rent payments and other lease obligations from the tenant, even if the tenant assigns the lease to someone else. It is an important mechanism in commercial property transactions, and it is essential to ensure that it is drafted correctly to avoid any potential issues.

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