A landlord owns a unit and lets it to the original tenant under a lease agreement dated 11th July 2010. The original tenant assigned his interest in the lease to the second tenant 10 years ago. The second tenant, in turn, assigned the lease to the current tenant five years ago and provided the landlord with an Authorised Guarantee Agreement. The lease still has eight years left to run. However, the current tenant is in rent arrears and is on the verge of bankruptcy.
Regarding the rent arrears, what options does the landlord have?
A landlord owns a unit and lets it to the original tenant under a lease agreement dated 11th July 2010. The original tenant assigned his interest in the lease to the second tenant 10 years ago. The second tenant, in turn, assigned the lease to the current tenant five years ago and provided the landlord with an Authorised Guarantee Agreement. The lease still has eight years left to run. However, the current tenant is in rent arrears and is on the verge of bankruptcy.
Regarding the rent arrears, what options does the landlord have?
The landlord may sue the current tenant or the second tenant for the rent arrears.
(C) The landlord can sue either the current or the subsequent tenant for the unpaid rent. In leases made after 1 January 1996, tenants are automatically released from their covenants upon assignment. However, landlords can require outgoing tenants to sign an Authorised Guarantee Agreement, making them liable for their immediate successor in title. In such cases, landlords can sue the tenant-guarantor for the current tenant's breach of covenant. This means that the landlord may pursue either the current tenant or the second tenant for the rent arrears.
Options (A) and (B) are incorrect because the landlord may seek to recover the rent arrears from either the second tenant due to the Authorised Guarantee Agreement or the current tenant. It is worth noting that the landlord can pursue the current tenant, even if that tenant is in bankruptcy, although this may make collection difficult.
Option (D) is incorrect because the landlord can sue either the current tenant or the second tenant for non-payment of rent. They do not need to rely solely on forfeiture or proceed only against the second tenant.
Option (E) is incorrect because the original tenant is released from liability on assignment and provided no Authorised Guarantee Agreement under which they may have continuing liability. Therefore, the landlord cannot proceed against the original tenant.