Broken Chain of Liability is Now Enshrined in Law
July 16, 2010, Property Week

The keenly-awaited property case Good Harvest v. Centaur settled this month, just as it was due to go to the English Court of Appeal. The case was due to clarify rules around tenant guarantees. Since the 1995 Tenant (Covenants) Act, it has become common to assume that guarantors were liable for the lease obligations of the next assignee. The High Court in May 2010 had decided that this practice should not continue, and that guarantors should not be liable. Lawyers have expressed concern that the Court of Appeal has not been able to rule on the issue due to the case settling, and that there continues to be significant uncertainty in the market as to how these cases will be treated going forward.

"Having acted for several clients on commercial property investments recently, this case comes up a lot." said David Cox, partner at law firm White & Case. "If you're looking to buy a new property, you've got to consider covenant strengths. Investors and banks are less sure of these now."