Security for Rent - Guarantees, Deposits and Other Options [2022]

Where it is proposed to let a property, or to assign an existing lease, the landlord’s chief concern will be the ‘covenant strength’ of the incoming tenant. In other words, does it have the financial ability to pay the rent and perform all the other tenant’s obligations in the lease, such as repair? If there is any doubt about that, the landlord will be looking for some form of security. There are various forms of security for performance of tenant’s obligations in commercial leases, and assessing their relative effectiveness is more important than ever in the wake of the experience of the Covid19 pandemic. The chief ones are provision of a rent deposit, or a suitable guarantee, though new ideas are beginning to emerge.

Below are a number of matters that will be covered:

• Lease Guarantees (Surety)
• Assessing Covenant Strength
• Covenant Strength of Assignor
• Drafting Considerations
• Avoiding 'Undue Influence'
• Lease Guarantees and Tenant Insolvency
• Retention of Guarantee upon Lease Assignment...and more