Alterations Invalidate Surety

December 11, 2013

Alterations Invalidate Surety

When a landlord gave a tenant a licence to make substantial alterations, little did it think that it was undermining its future financial position.

The reason was that another party had ‘stood surety’, acting as guarantor over the lease payments. The variation of the lease meant that the surety was no longer bound by its undertaking, having not given its consent to the alterations.

When the tenant became insolvent, the landlord sought payment under the guarantee given by the surety. However, the High Court agreed with the surety that the variation in the lease meant that its guarantee was no longer valid.

In certain circumstances the benefit of third party undertakings can be lost inadvertently.