Real Estate - Tip of the Week: Guarantees and Indemnities - Spot the Difference!

Real Estate - Tip of the Week: Guarantees and Indemnities - Spot the Difference!'s Tags

Tags related to this article

Real Estate - Tip of the Week: Guarantees and Indemnities - Spot the Difference!

Published 24 junio 2019

Guarantees and indemnities are often found together in leases, but are very different obligations.

A guarantee is a secondary obligation to ensure that the tenant carries out its obligations. It sits alongside the primary obligations of the tenant under the lease.

An indemnity on the other hand is a primary obligation to be responsible for another party’s losses i.e. the landlord’s loss suffered as a result of a tenant’s breach. An indemnity is independent of the underlying contract or obligation.

A guarantee must be in writing and signed by the guarantor. Guarantees are more advantageous to the guarantor as they provide rights to indemnity, right of set-off, subrogation and marshalling, in the event that the guarantee is called upon.

An indemnity is much wider, it does not need to be in writing or signed by the indemnifier. It will even survive the underlying transaction being set aside. With the right drafting it can even cover all of the landlord’s losses on a full indemnity basis.

Where the tenant is required to have a guarantor, it is standard to find guarantees and indemnities together since the combination is more beneficial to the landlord, should it need to rely on it.

However they do differ and so care needs to be taken when trying to enforce them.

Authors

Morgan Raines

Morgan Raines

London - Walbrook

+44(0)20 7894 6591

< Back to articles