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Landlords – Check your suretyships!

If your tenant is a corporate in financial distress and you find yourself calling up the director’s suretyship, you could be in for a nasty shock if the suretyship isn’t absolutely clear on exactly what the surety is liable for.

The reason – our law interprets all suretyships “strictly”, which means that they “may not be extended beyond what was expressed or was at least covered by the intention and sense of the words of the suretyship”. Put another way, our courts will not likely hold a surety to be bound beyond the express wording of the suretyship, whether in regard to premises or the period of the lease.

The one that got away

Thus the High Court recently let a surety off the hook in a case where a tenant had occupied premises under three consecutive leases. The director signed surety for the first lease, and the landlord had clearly been under the impression that he still held a surety for the subsequent leases. But, held the Court, the landlord should have specified clearly that the surety was bound for future leases as well as for the initial lease – and as it had not done so unambiguously, the surety was not liable.

© DotNews, 2005-2012. This newsletter is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

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