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Jennifer Chappell, senior associate at Bircham Dyson Bell LLP,
believes that the case of Trustees of Beardsley Theobalds
Retirement Benefit Scheme v J Yardley is a warning to landlords to
check that personal guarantors have been made aware of their
commitments. Failure to do so could render the guarantee
unenforceable.
"Personal guarantees should always be checked up front;
there is no mileage in merely getting ink on paper - the guarantee
may not be worth the paper its written on if the guarantor
hasn't understood the implications," explains
Jennifer Chappell.
"Landlords must make sure that individual guarantors
are financially sound and know what they're gettting into,
which means getting an acknowledgement in writing that they have
been fully advised and are aware of the risks.
"I wouldn't advise individuals to give personal
guarantees in any circumstances, given the state of the economy or
not. However if you do agree, make sure you exercise caution
and consider the implications with your legal advisors at your
side. In the Yardley case, the defence of undue influence was
successfully relied upon by Mr Yardley and his guarantee was
unenforceable. After all, he was duped into signing up as guarantor
to a lease when he thought he was witnessing a
signature!"
"Responsibility also lies with the landlord to make
sure the guarantor receives independent legal advice. Given the
fact that the landlord knew the tenant company was having financial
difficulties and the confusion over whether or not Yardley was a
board director, the landlord should have got an unequivocal
acknowledgement from the individual that he knew what he was
signing" says Chappell. "Failure to do this may leave you
high and dry".
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