• 01616 966 229
  • Request a callback
Stephensons Solicitors LLP Banner Image

News and Events

A warning to landlords - can the death of a guarantor bring a guarantee to an end?

View profile for Matthew Smith
  • Posted
  • Author
Commercial rent arrears recovery

The general rule under the principles of contract law is that the death of a party to a contract does not automatically discharge the contract. This includes guarantee agreements, though specific rules can exist for such agreements, and it is possible for death to automatically bring about a termination in limited circumstances.   

The starting point is the construction of the guarantee. Ordinarily, a guarantee will govern what happens to the liability upon the guarantor’s death. A common clause is that any liability that existed at the time of the guarantor’s death will be payable by their estate. Another possibility is that the guarantee may be limited to certain circumstances or a specific transaction. For example, the guarantee may only exist for the duration of the fixed term tenancy, and so if this expired prior to the guarantor’s death, then clearly there will be no further liability upon expiry of the fixed term.

However, case law shows that it is possible for a guarantee to automatically come to an end if there has been notice of the death of the guarantor, though this does not preclude any liability for debts that arose prior to the guarantor’s death. The distinction here is that notice of the guarantor’s death will bring the guarantee to an end at the time of that notice, meaning that there will be no further liability, but any liability which existed prior to the notice, will remain.

Whilst notice of death can bring the guarantee to an end, the construction of the guarantee could specify otherwise, and the wording of the guarantee is usually the default position over any contrary case law. Therefore, close attention to the wording of the guarantee is required, and this is why the starting point is always the guarantee itself. Particular attention should be paid to whether specific form of notice (to bring the guarantee to an end) is required, because failure to comply with these requirements may render the notice invalid and mean that liability will continue until correct notice is provided.

If you are a landlord that is seeking a guarantee for a new tenant, then thought should be given to ensure that the guarantee remains enforceable upon death of the guarantor. Furthermore, if you have received notice of a guarantor’s death, you should carefully consider whether that guarantee is now at an end and whether a new guarantee ought to be obtained.

The law surrounding guarantee agreements can be complex and is often fact sensitive. Getting it wrong can have significant consequences for landlords, particularly if they are required to rely on the guarantee at some stage. Should you require any advice or assistance in respect of any of the issues above, please do not hesitate to contact our landlord and tenant specialists on 0161 696 6170 and we may be able to assist you.