Form of guarantee for discussion

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Form of guarantee for discussion

    It is not unknown for me to criticise the drafting of others perhaps leaving some contributors wondering just how good I am at drafting. Here is an opportunity for you to judge. Below is a deed of guarantee I drafted for someone a while ago. I think the whole thing hangs together well and is in accordance with comments I have made in various threads over the years. If I have any reservations it is perhaps (despite the elegant phrasing!) that it falls a little short of being expressed in what some would consider plain English.

    N.B. As the title to the thread says, the draft is only offered for discussion. Anyone using the form does so entirely at their own risk. For full professional advice backed by indemnity insurance consult a solicitor or licensed conveyancer.

    ***

    THIS DOCUMENT IMPOSES POTENTIALLY ONEROUS OBLIGATIONS. YOU ARE ADVISED TO TAKE LEGAL ADVICE BEFORE SIGNING IT.


    A Deed of Guarantee
    dated [leave space to write in date] 2015

    1. Parties

    1.1 The Guarantor: [insert name(s) and address(es) of guarantor(s)]

    1.2 The Landlord: [insert name(s) and address(es) of landlord(s)]

    2. Definitions and Interpretation

    In this deed:

    2.1 “the Tenant” means [insert name(s) of the tenant(s)]

    2.2 “the Tenancy Agreement” means an agreement dated the same day as this deed and completed immediately before it made between the Landlord (1) and the Tenant (2) relating to [insert address of property]

    2.3 “the Rent” means the rent reserved by the Tenancy Agreement

    2.4 “the Tenant's Obligations” means the obligations imposed on the Tenant by the Tenancy Agreement

    2.5 “damages” includes any liabilities, awards of damages, losses, compensation, penalties, costs, disbursements and expenses resulting from any claim, demand, actions or proceedings

    2.6 “the Guarantee” means the guarantee given by clause 4

    2.7 Where a party consists of more than one person any covenant given is given jointly and severally

    3. Background

    The Tenancy Agreement was entered into on the basis that the Guarantor would guarantee the payment of the Rent and the performance of the Tenant's Obligations

    4. Guarantee

    The Guarantor covenants with the Landlord that the Tenant will pay the Rent and observe and perform the Tenant's Obligations and if the Tenant fails to do so the Guarantor will pay the Rent and observe the Tenant's Obligations in respect of which the Tenant is in default and make good to the landlord on demand and indemnify the Landlord against all damages arising from such non-payment non-observance or non-performance

    5. Extent of Guarantee

    The Guarantor and the Landlord agree that the Guarantee continues even if

    5.1.1 the terms of the Tenancy Agreement are varied so long as they are not varied in any way which materially prejudices the Guarantor

    5.1.2 the Landlord grants any time or indulgence to the Tenant by neglecting or forbearing to enforce payment of the Rent or the observance and performance of the Tenant's Obligations

    6. Acknowledgement

    6.1 The Guarantor acknowledges that he has been afforded sufficient opportunity to read the Tenancy Agreement or a draft of it before executing this deed.

    6.2 The Landlord warrants that the Tenancy Agreement is in substantially the same form as any draft of it supplied to the Guarantor and to the extent that it is not the changes were drawn to the Guarantor's attention in writing before the Guarantor executed this deed.

    7. Deed

    This instrument is executed by the parties as a deed.

    Signed as a deed by
    [insert name of guarantor]
    in the presence of:

    Witness signature
    Witness name
    Witness address




    Signed as a deed by
    [insert name of landlord]
    in the presence of:

    Witness signature
    Witness name
    Witness address

    #2
    Perhaps if anyone uses this LC tthey might donate to a charity?

    Looks watertight to me but IANAL.
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      That's far too clear and comprehensible.
      That sound you can hear is generations of lawyers rolling in their graves.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        An agent witnessing a deed will not prejudice its validity, but may affect its enforceability. It allows the guarantor to argue that he was browbeaten into signing or misled as to the nature of the document or the obligations set out in it.

        There are in fact no logistical problems because a deed, or indeed any document, does not have to be dated on the day it is executed. Quite apart from anything else, different signatories may sign on different days. In property transactions in particular documents are regularly signed on the basis that they will take effect at some future time. In everyday conveyancing transactions a seller will sign the transfer to the buyer before completion and the buyer may sign a mortgage before he actually owns the property. In the case of a guarantee there has to be serious doubt about whether a deed (at least one not drafted to allow for the possibility) can guarantee a tenancy which has not come into existence. Whilst equity may ride to the rescue, you do not want to get involved in that sort of argument. There is no need when you can simply get the guarantor to execute the document and leave it undated, completing it at the same time as you complete the tenancy agreement.

        The deed is adequate to guarantee periodic tenancies. However, the guaranteeing of periodic tenancies is not recommended if you are going to follow the advice I have given elsewhere to keeps things simple and avoid imposing open ended obligations on a guarantor.

        Comment


          #5
          When two deeds are completed on the same day the law assumes that are completed in the order necessary to give effect to both of them. Where one is stated to be completed immediately after the other the purpose is to avoid argument. There will be no enquiry as to how it long an interval there was between completing the documents nor as to whether care was taken to ensure they were completed in the correct order. As they are deeds the parties cannot deny the truth of any statement in them. Even if they are not deeds common sense will prevail.

          To confirm what I said above, deeds can be thought of as having two stages. The first is execution and the second completion. Avoiding legal jargon and without going into the technicalities, when executed a deed may be regarded as only taking effect when any conditions to which it is subject have been satisfied. The conditions may be express, but are usually implied, for example a conveyance of land is executed subject to payment of the purchase money. The system means that logistical problems do not arise and all the parties do not need to gather together to complete a transaction and can leave a transaction to be completed by whoever is designated to do so.

          Ignoring for the moment the special problems associated with guarantees, if someone signs a deed and it refers to another document he is deemed to have full knowledge of the document referred to. That is again because of the special nature of a deed, though the principle may extend to other documents. A party to a deed cannot argue that he never saw the document or saw it but did not have time to read it properly.

          Few if any rules are absolute and it is always open to a party to a deed who was not legally represented to argue that he was misled. This is especially the case with deeds which guarantee or secure the obligations of a third party where the guarantor or person giving the security derives no benefit. Whilst the law clearly allows such arrangements a court will always look very carefully at them to satisfy itself that everything was above board. As Lady Hale said in the bank charges case, "As a very general proposition, consumer law in this country aims to give the consumer an informed choice rather than to protect the consumer from making an unwise choice."

          All this makes it quite difficult to be sure that your guarantor is going to be bound. The counsel of perfection, which rules out most difficulties apart from the guarantor pleading undue influence, is to get the guarantor to sign the guarantee before a lawyer who certifies he has explained it. That naturally adds expense that few are willing to meet. The next best is to make sure you do not do anything which may let the guarantor off the hook. That means having a reasonable clearly drafted guarantee, giving the guarantor time to digest everything, issuing suitable warnings and generally behaving like Caesar's wife.

          Making the tenancy agreement conditional on the guarantee is on the whole a bad idea. In any event, getting the guarantor to confirm he has read the completed tenancy agreement does not really take you a lot further forward as he can still claim he failed to understand it.

          Without suggesting that it is impossible to get an enforceable guarantee, the best way of looking at a guarantee is to hope that it encourages the tenant to pay, rather than to treat it as security. If you do that you will not be too disappointed if you fail to extract cash from the guarantor if the tenant defaults.

          Comment


            #6
            It is sensible to be able to prove guarantor had chance to read tenancy & draft guarantee some time before signature etc of deed.
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

            Comment


              #7
              Possible alternative:

              Add to clause 2.2 the words: "a copy of which is attached to this agreement"

              If you do that then it means attaching a copy of the agreement to the guarantee. The copy will of necessity be incomplete and will need to be "made up" before completing the guarantee, that is the date and details of execution will need to be inserted. The guarantor should be asked to sign each page of the copy at the bottom.

              ***

              The problem here is that, compared with jurisdictions which require important documents to be notarised, the execution of deeds is somewhat informal. It is rather predicated on the assumption that the execution and completion of deeds is under the control of lawyers.

              Comment

              Latest Activity

              Collapse

              Working...
              X