Authorised guarantee agreements (AGAs) explained

When a tenant assigns their commercial lease to someone else, the landlord often wants reassurance that the new tenant will meet their obligations. That’s where an authorised guarantee agreement, or AGA, comes in. It’s a legal commitment by the outgoing tenant to guarantee the incoming tenant’s performance of the lease.

AGAs are common in commercial property transactions but can create unexpected liabilities if not handled properly. Understanding what they mean — and when they can be required — is essential for both landlords and tenants.

If you’re considering assigning or taking over a commercial lease, our commercial property solicitors can help you review the agreement and protect your position before signing.

What is an authorised guarantee agreement?

An AGA is a deed signed when a lease is assigned from one tenant to another. It requires the outgoing tenant (the assignor) to guarantee that the incoming tenant (the assignee) will comply with the lease terms, including paying rent and maintaining the property.

The guarantee lasts until the assignee lawfully assigns the lease again or the term ends. In some cases, an AGA can also apply during any statutory continuation of the lease, for example, if the lease is being ‘held-over’ under the Landlord and Tenant Act 1954. If the assignee defaults, the landlord can pursue the former tenant for rent arrears or other breaches under the AGA.

When can a landlord require an AGA?

Under the Landlord and Tenant (Covenants) Act 1995, a landlord can only require an AGA in limited circumstances. It must be reasonable to do so — for example, where there are genuine concerns about the new tenant’s financial standing or trading history. The landlord cannot impose an AGA automatically for every assignment. These conditions will be set out in the lease. Therefore, if the lease permits an AGA, the landlord may request one if it is reasonable to do so.

Key terms to look out for

An AGA usually includes obligations such as:

• Guaranteeing rent and service charge payments.
• Covering any damages or costs resulting from the assignee’s breach.
• Taking a new lease if the assignee’s lease is forfeited.

These terms can vary between landlords, so legal advice before signing is essential. The outgoing tenant should also ensure they’re released from the AGA once the lease is assigned again.

When negotiating an AGA, an outgoing tenant can seek several protections to limit future risk. These may include capping the total financial liability to a set amount or restricting the guarantee period to a defined timeframe, such as until the assignee renews the lease or after a fixed number of years.

The tenant can also request automatic release from the AGA once the lease is assigned again or if the landlord consents to a variation of terms without the guarantor’s agreement. Additionally, negotiating limits on liability for future rent increases or repair costs can further reduce exposure. Obtaining clear, written terms is essential to ensure these protections are enforceable.

What happens if an AGA is breached

If the assignee breaches the lease, the landlord can demand payment directly from the guarantor (the outgoing tenant). In some cases, the landlord can also require the guarantor to take a new lease on the same terms, which can create significant financial exposure.

Alternatives to AGAs

Some landlords may agree to alternative forms of security, such as rent deposits or guarantors provided by the incoming tenant. This can reduce the outgoing tenant’s risk and still give the landlord confidence in the new tenant’s reliability.

Compared to AGAs, rent deposits and personal guarantees offer different balances of risk and security. A rent deposit provides the landlord with immediate financial protection while limiting the outgoing tenant’s ongoing liability once the lease is assigned.

Personal guarantees, usually given by directors or related parties, shift responsibility to the incoming tenant’s guarantor rather than the former tenant. An AGA may be more suitable where the landlord seeks assurance of continuity from a known tenant, while rent deposits or personal guarantees are preferable when the outgoing tenant wishes to achieve a clean break from future obligations.

FAQs about authorised guarantee agreements

Below are some common questions about authorised guarantee agreements and how they affect landlords, tenants, and assignees.

1. What is an authorised guarantee agreement?

   An (AGA) is a legal commitment where an outgoing tenant guarantees that the incoming tenant (assignee) will comply with the lease terms after assignment.

2. When can a landlord require an AGA?

   A landlord can usually require an AGA when granting consent to assign a lease, provided it is reasonable and allowed under the lease or by law (such as the Landlord and Tenant (Covenants) Act 1995).

3. What risks does an AGA create for the outgoing tenant?

   An AGA can expose the outgoing tenant to ongoing liability for rent, service charges, and breaches by the assignee until they are released from the guarantee.

4. If the assignee (incoming tenant) defaults, does the outgoing tenant’s AGA liability end automatically?

   No. Under the Landlord and Tenant (Covenants) Act 1995, the outgoing tenant remains liable under the AGA until the first of either the current assignee lawfully assigns the lease or the lease term ends — and only if the landlord grants release.

5. Can an outgoing tenant negotiate not to provide an AGA at all?

   Yes. While many leases give the landlord a right to require an AGA, the outgoing tenant may negotiate to substitute alternatives (such as a rent deposit or guarantor) or include a clause limiting the landlord’s ability to demand an AGA unless it is reasonable in the circumstances.

Guidance from our commercial property solicitors

Our commercial property solicitors regularly advise landlords, tenants, and assignees on assignments and AGAs, ensuring each party understands their rights and obligations before signing. We review draft terms, negotiate protections, and help clients avoid unnecessary long-term liabilities.

James Halpin, solicitor and head of commercial property, comments:

“An AGA is often presented as a standard requirement when assigning a lease, but it can create ongoing obligations long after you’ve left the premises. You could still be liable for rent or breaches by the assignee. Professional guidance can help you assess and manage this risk effectively."

With experience across a wide range of commercial leases, our team provides practical, cost-effective advice tailored to your business needs. Get in touch to speak with our commercial property solicitors.