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Media Briefing Note: K/S Victoria Street -v- House of Fraser (Stores Management) Limited & Ors

27 July 2011

LONDON, 27 July 2011 - Commenting on today's Court of Appeal ruling in K/S Victoria Street -v- House of Fraser (Stores Management) Limited & Ors. Mathew Ditchburn, partner in Hogan Lovells' real estate team, said:
"The landlord will be feeling sore about losing its appeal, but overall this is a good day for the property industry.
The Court could see exactly where the landlord was coming from.  House of Fraser had signed up to the deal with its eyes open and for its own benefit - the back to back letting and assignment made the sale more tax efficient.  It is hard in those circumstances to see exactly what injustice the 1995 Act is trying to cure by stopping the guarantor from guaranteeing the assignee's obligations.  However, the Court just couldn't get around the clear wording of the Act.
What the Court has done is come up with complex solution to a simple problem.  Whilst a guarantor cannot give a new guarantee of an assignee, it can enter into an AGA as a so-called "sub-guarantor" and perhaps also as a "co-guarantor".  It may even be able to enter into a new guarantee when the lease is next assigned.  The practical effect for landlords should hopefully be the same."


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