Termination of Tenancies for Tenant Default - Law Commission

entitled to use the scheme to protect that interest. 33 Those who responded and
expressed a view stated that they considered that such persons should be so
entitled.
6.38 We therefore recommend that those with the benefit of options to purchase or
rights of pre-emption over the tenancy should qualify for protection. We do not
believe that it will be difficult for the landlord to discover the existence of these
interests. The landlord’s consent is often a pre-requisite to the grant of an option
by the tenant and the landlord will therefore have actual notice of it. Both interests
can be registered with HM Land Registry and, as discussed above, the landlord
is required to search the register to discover qualifying interest holders, so that
they can be served with a tenant default notice.
Sureties and guarantors
6.39 The Judges of the Chancery Division asked whether a surety or a guarantor, or a
former tenant who had been called upon to make good the tenant’s default,
should come within the scheme. Under current law, the status of such persons
following forfeiture of the tenancy but pending the outcome of any application for
relief is uncertain. 34 It is, however, clear that they do not have the right to apply
for relief from forfeiture solely by virtue of their position as a surety or guarantor.
6.40 After much deliberation we have decided against including sureties and
guarantors as qualifying interest holders under the scheme, merely by virtue of
their status as such. We have reached this conclusion for a number of reasons,
not least that it is impossible to generalise about the rights and obligations of
sureties and guarantors. These are defined by the particular terms of the
agreements that create and regulate the relationship between them and the
landlord. We believe that the inclusion of such persons as qualifying interest
holders would create uncertainty as to the operation of the scheme.
6.41 Sureties and guarantors do not, strictly speaking, hold interests in the tenancy.
Their interest is purely personal. Sureties and guarantors routinely enter into
separate agreements of indemnity with the tenant whose liability they are
guaranteeing to secure repayment from the tenant of any sums that they are
called upon by the landlord to pay. We see no reason to provide them with a
statutory basis for recouping the tenant’s debt. Such a provision could adversely
affect the landlord and any other derivative interest holders and could result in
more complex and expensive litigation.
6.42 We are aware that under certain guarantee agreements the surety or guarantor,
on being called to make good the tenant’s default, may require the tenant to
assign the tenancy to them or to grant a mortgage or charge over the tenancy.
Within the list of qualifying interests which we recommend, we include any right to
an assignment of the demised premises (whether of whole or part) and any right
to an assignment of a charge on the tenant’s (or sub-tenant’s) interest in the
premises. This provision will enable sureties and guarantors to seek orders from
33 CP, para 12.7(4). The First Report recommended that those with enforceable rights to
acquire an interest in the tenancy, which would include holders of options and rights of preemption,
should come within the “derivative class”: First Report, para 10.26.
34 Hynes v Twinsectra Ltd (1995) 28 HLR 183.
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