Bank Guarantees are a popular and convenient alternative to
holding a security deposit during a lease term for many landlords.
However, care must be taken to ensure the Bank Guarantee is
effective security and not liable to challenge by either the bank
or the tenant upon presentation by the landlord in the event of
default. We recommend that landlords ensure their tenants strictly
comply with the following requirements for Bank Guarantees to
minimise this risk. These include:
the accurate identification of the landlord as favouree (eg
include the ACN for a company);
including the full name of the tenant under the Lease (as
opposed to merely the obligation to pay rent);
specifying the complete and accurate name of the tenant and
tenancy (especially where the customer of the bank for whom the
bank guarantee is issued is not the tenant). There is authority
that the validity of the Bank Guarantee is in doubt unless the Bank
Guarantee directly refers to the contract, lease or other document
or transaction in question;
that it be issued by an Australian Bank - a foreign bank issued
Bank Guarantee may raise foreign jurisdictional issues if the Bank
Guarantee is presented by the landlord for payment; and
stating that no expiry date applies - some banks are resisting
this and now require an expiry date to be specified.
In a situation where a bank simply refuses to issue the Bank
Guarantee without an expiry date, we recommend that if an expiry
date is agreed to that it be as long as possible after the expiry
date of the lease (at least 6 months) or (if applicable) at least 6
months after the expiry date of the final further (option) term.
This additional period would cover any holding over or make good
costs that the Lessor may incur following the tenant's
departure from the premises after the lease expiry. It is extremely
important where a lease contains an option to renew that either the
Bank Guarantee contain no expiry date or landlords ensure that a
condition of the valid exercise of the option to renew includes the
provision of a replacement bank guarantee for the renewed lease
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
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