08 Oct When Does an Authorised Guarantee Agreement End
When Does an Authorised Guarantee Agreement End?
An authorised guarantee agreement (AGA) is a legal document that is used when a commercial leasehold property changes hands. This document is signed by the original tenant and the new tenant as a guarantee that the new tenant will fulfill the obligations of the original tenant under the lease.
Many tenants are unsure about when an AGA ends and what their obligations are under the agreement, so it is essential to understand what an AGA is and how it operates.
The Length of an AGA
The length of an AGA can vary, but it generally lasts for the remainder of the lease term. For example, if the lease has five years remaining, the AGA would be in effect for that same length of time.
The obligations of the new tenant to the landlord under the lease are the same as those of the original tenant. If the new tenant does not fulfill these obligations, the landlord can hold both the new tenant and the original tenant responsible for any damages.
Termination of an AGA
An AGA can be terminated in several ways. The most common way is if the lease is surrendered or if the landlord agrees to release the original tenant from the lease obligations. In such cases, the AGA would also be terminated.
The second way an AGA can end is if the lease is renewed or extended. When the lease is renewed or extended, the new lease becomes a new agreement, and the previous AGA is no longer valid.
Finally, an AGA can end if the lease is assigned to a third party. If the new tenant assigns the lease to someone else, they are no longer responsible for the lease obligations, and the AGA ends.
Conclusion
An authorised guarantee agreement is a legal document that is used in commercial leasehold property transactions. It guarantees that the new tenant will fulfill the obligations of the original tenant under the lease. The AGA typically lasts for the remainder of the lease term and can be terminated in several ways, including surrendering the lease, renewing or extending the lease, or assigning the lease to a third party. As a tenant, it is important to understand your obligations under the AGA, as failing to fulfill these obligations can have financial consequences.