assignment guarantee agreement

Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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assignment guarantee agreement

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: January 22, 2024 · 3min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

Person presenting documents to another person who is signing them

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

  • The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
  • The assignor must agree to assign their rights and duties under the contract to the assignee.
  • The assignee must agree to accept, or "assume," those contractual rights and duties.
  • The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

  • First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
  • All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
  • Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

  • Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
  • The effective date of the assignment and assumption agreement
  • Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
  • Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
  • Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
  • A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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News & Insights

Understanding authorised guarantee agreements.

Our commercial property partner Michael Higgin explains what an AGA is, and what its enforcement means in practice. 

The law on Authorised Guarantee Agreements is complicated, and is evolving as cases on the Landlord & Tenant (Covenants) Act 1995 (the “1995 Act”) are working their way through the courts.

Lawyers call leases “old” or “new”, as referred to in the 1995 Act. Leases dated before 1 January 1996 (or granted pursuant to Agreements for Lease entered into before that date) are referred to as “old” leases, and leases dated on or after that date are “new” leases.

With an “old” lease the original landlord and original tenant are bound to perform all the landlord and tenant obligations throughout the whole lease term, even if they transfer their interest to someone else. This principle is called “privity of contract”. So, for example, an original tenant who assigned their lease some years earlier could receive a demand for outstanding rent payments or to perform other tenant obligations, by reason of the default of the current tenant, and they would have to pay up or perform those obligations. This came to be regarded as particularly onerous on tenants and was seen as overly protective of landlords. Accordingly, the 1995 Act set out to release tenants and third parties of their obligations on assignment.

However, this release is qualified, as the landlord has the option to require the outgoing tenant, on assignment, to guarantee the obligations of the new tenant (the “assignee”) by way of an “Authorised Guarantee Agreement”, commonly referred to as an “AGA”. This guarantee only lasts until the assignee assigns its interest in the lease – upon such subsequent assignment the guarantor’s AGA falls away.

An AGA can require the guarantor to enter into a new lease, if the lease is disclaimed by a trustee in bankruptcy or liquidator.

Most AGAs provide for a guarantor’s liability to automatically arise when there is a liability under the lease and does not require a formal demand to be made by the landlord. However, s.17 of the Landlord & Tenant (Covenants) Act 1995 provides that the guarantor will not be liable under an AGA for rent, service charges or other “fixed charges” that the assignee has failed to pay, unless the landlord serves notice on the guarantor within six months of their respective due date, following the assignee’s failure to pay. This is described as a “s.17 Notice”. “Fixed charges” must be ascertained: they can therefore include balancing service charges which have been assessed, or third party costs which have been incurred. This process does not apply to unspecified liabilities such as unquantified claims for compensation for disrepair, which are still claimable, just not through this process.

Having received a s17 Notice the guarantor should settle the liability to the landlord. At this stage the guarantor is not in possession of the premises (having made an assignment of the lease), but still has liability to pay the rent every following quarter if the assignee does not pay it. Having received a s.17 Notice upon which it has made a payment, the guarantor can bring matters to a resolution by serving notice under Section 19 of the 1995 Act (a “s.19 Notice”) calling for an “overriding lease” to be granted. This new lease is inserted between the interests of the landlord and the assignee, converting the assignee into an undertenant. This allows the guarantor to pursue the assignee for the rent debt and/or to negotiate a surrender of the underlease and/or to forfeit the lease (it now being an underlease) which enables the guarantor to re-use the premises or to market and dispose of them a second time.

The landlord may have several people upon whom a s.17 Notice can be served and needs to be aware of the fact that any one of them can apply for an overriding lease.

The landlord should therefore only serve a s.17 Notice upon a party who it would be prepared to have as its tenant going forwards pursuant to an overriding lease.

A guarantor under an AGA should take legal advice promptly upon receipt of a s.17 Notice.

Michael Higgin

assignment guarantee agreement

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Authorised guarantee agreements - what are they and what should a tenant know

Introduction.

There is a common misconception that selling a commercial lease will relieve the seller of liability for rent and other obligations under the lease. However, if you are entering into a lease of a commercial property it is likely that the lease will include provision that the outgoing tenant enters into an Authorised Guarantee Agreement or "AGA" if the lease is sold (assigned) to a third party.  This article explains the key terms of an AGA and gives practical pointers on how a tenant can improve its position during a negotiation.

What is an AGA?

An AGA is an agreement which places an obligation on an outgoing tenant to guarantee the performance by the new tenant or "Assignee" of the tenant covenants contained in the lease.

If the Assignee fails to perform the tenant covenants in the lease (which include payment of rents and repair obligations) the AGA allows the landlord to pursue the outgoing tenant under the terms of the AGA.

An AGA also provides the landlord with the option to insist on the outgoing tenant taking on a new lease (on the same terms of the existing lease) if the new tenant defaults and the existing lease is disclaimed. 

How long does it last?

It is usual that an AGA lasts from the date the outgoing tenant sells their interest in the lease to the Assignee until that Assignee has validly disposed of their interest in the lease to a third party or until the term of the lease comes to an end (whichever is sooner). 

Depending on the strength of the tenant's negotiating position a tenant may seek to insert a time limit as to their liability under an AGA.  Any time limit agreed should be expressly stated in either the lease or, if the time limit is agreed when consent to an assignment is given, the AGA in order to protect the tenant's position on a subsequent assignment. 

Points tenant should consider when negotiating terms of a lease

The Code for Leasing Business Premises in England and Wales 2007 provides that an AGA should only be required by the landlord if the Assignee is of lower financial standing than the outgoing tenant or if the Assignee is registered or resident overseas. It is suggested that for smaller tenants a landlord should accept a rent deposit from the Assignee instead of an AGA from an outgoing tenant. 

Tenants can seek to agree with the landlord that an AGA will only be necessary if the above factors are relevant.  Alternatively a tenant can seek to negotiate that any lease expressly states that an AGA will only be provided if at the date of assignment it is "reasonable in the circumstances".  Without the inclusion of the reasonableness wording in a lease a landlord may be able to insist that the outgoing tenant enters into an AGA as a condition of the landlord giving consent to an assignment, even if the covenant strength and financial standing of the Assignee is greater than that of the outgoing tenant. 

Points for tenants to consider on an Assignment

Under statute, an AGA is void if it seeks to impose any further liability on the outgoing tenant than that contained in the lease.

As outlined above, depending on the wording of the lease and the financial standing of the Assignee the tenant may seek to persuade the landlord to dispense with the requirement for an AGA or to impose a time limit on the outgoing tenant's liability under the AGA.

If the lease being assigned is a business lease which has security of tenure under the Landlord and Tenant Act 1954, an outgoing tenant providing an AGA must bear in mind that the AGA may continue beyond the end of the contractual term of the lease.  If the lease continues beyond the end of the contractual term this is known as "holding over".  Holding over can continue until such time as either the landlord or tenant serves a notice on the other to either end the lease or enter into a new lease.  A tenant providing an AGA on an Assignment should seek to ensure that the AGA does not include any holding over period in order that the tenant has certainty as to when their liability under the AGA will come to an end.

AGAs are commonplace in leases of commercial property but it is important that tenants understand the implications of them when the lease is initially granted and on any subsequent assignment. 

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Guaranty Agreement

Jump to section, what is a guaranty agreement.

A guaranty agreement is a contract between two parties where one party agrees to pay a debt or perform a duty in the event that the original party fails to do so. The party who makes the guaranty is called the guarantor. An agreement of this nature is often used in real estate, insurance, or financial transactions.

A guaranty is sometimes called a guarantee or a warranty. A guaranty agreement can be absolute, meaning the guarantor will assume the obligation for any reason. Or it can be conditional, meaning the guarantor will assume the obligation under specific circumstances.

Common Sections in Guaranty Agreement

Below is a list of common sections included in Guaranty Agreement. These sections are linked to the below sample agreement for you to explore.

Guaranty Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-99.1 2 dex991.htm GUARANTY AGREEMENT , Viewed October 13, 2021, View Source on SEC .

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Michael M. on ContractsCounsel

www.linkedin/in/michaelbmiller I am an experienced contracts professional having practiced nearly 3 decades in the areas of corporate, mergers and acquisitions, technology, start-up, intellectual property, real estate, employment law as well as informal dispute resolution. I enjoy providing a cost effective, high quality, timely solution with patience and empathy regarding client needs. I graduated from NYU Law School and attended Rutgers College and the London School of Economics as an undergraduate. I have worked at top Wall Street firms, top regional firms and have long term experience in my own practice. I would welcome the opportunity to be of service to you as a trusted fiduciary. In 2022 I was the top ranked attorney on the Contract Counsel site based upon number of clients, quality of work and top reviews.

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Daniel F. on ContractsCounsel

An experienced attorney with a varied range of legal abilities. Focusing on real estate transactions and general commercial litigation.

Doug F. on ContractsCounsel

Doug has over 20 years of private and public company general counsel experience focusing his legal practice on commercial transactions including both software and biotech. He is a tech savvy, business savvy lawyer who is responsive and will attain relationship building outcomes with your counterparty while effectively managing key risks and accelerating revenue. He received his Juris Doctor from Boston University School of Law earning the Book Award in Professional Ethics and after graduation he taught legal writing there for a number of years. Prior to law school, Doug earned a M.A in Mathematics at the State University of New York at Stony Brook, and a B.S in Honors Mathematics at Purdue University. After law school, Doug joined Fish & Richardson, where his practice focused on licensing software, trademarks and biotech. While at Fish & Richardson Doug authored a book on software licensing published by the American Intellectual Property Lawyers Association. Later he joined as General Counsel at FTP Software and led an IPO as well as corporate development. Doug has broad experience with a broad range of commercial agreement drafting and negotiation including SaaS software and professional services, distribution and other channel agreements, joint venture and M&A. Doug continued his leadership, corporate governance and commercial transaction practice at Mercury Computers (NASDAQ:MRCY) leading corporate development. Doug’s experience ranges from enterprise software to biotech and other vertical markets. He joined the board of Deque Systems in 2009 and joined in an operating role as President in 2020 successfully scaling the software business.

Kathryn K. on ContractsCounsel

I graduated from Georgetown Law in 2009 and have been practicing for fourteen years. I primarily work on commercial contracts. I specialize in drafting, reviewing, and negotiating MSAs for services companies, specializing in SaaS agreements. I have drafted online terms of service, acceptance use policies, and privacy policies for clients across a range of industries. In addition, I counsel clients on NDAs, non-solicitation/non-competition agreements, employment contracts, and commercial and residential leases. Prior to opening my own practice, I worked for four years at one of the most prestigious law firms in the world, an appellate litigation firm, the federal government, and one of the country's most renowned government contracts firms. I live in Boulder but represent clients nationwide. Although I have represented numerous Fortune 500 companies and the Defense Department, my passion is advising startups and small businesses. Like so many of my clients, I am an entrepreneur and have owned and operated three businesses (my law firm and two companies outside the legal field). I understand the needs and concerns of small business owners. I look forward to working with you.

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Max L. on ContractsCounsel

Hi there. My practice focuses on several aspects of business law, including business entity formation and organizational documents, trademark and copyright, tax disputes, and contracts. I work with quite a few creative entrepreneurs, such as photographers, artists, and musicians.

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Guaranty Agreement

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Guaranty Agreement

Rating: 4.7 - 23 votes

A Guaranty Agreement is an agreement whereby loan or a debt of an individual is "guaranteed" by someone else. In other words, the party "guaranteeing" the loan or debt is agreeing to pay the amount owed if the person taking out the loan or debt defaults, or doesn't pay. In a Guaranty Agreement, only one party is signing the actual document, the guarantor, but the agreement is made among three parties: the creditor , who is extending credit, the debtor , who is taking out the debt or loan, and the guarantor , who is the party guaranteeing the money.

Guaranty Agreements are often quite simple and only need to contain the basic information between the parties: their identities, their contact information, what debt is being guaranteed and the additional terms surrounding that debt .

How to use this document

This document can be used by any of the three relevant parties looking to get their Guaranty Agreement down on paper. A creditor can use this Guaranty Agreement to outline the terms for a line of credit being extended to a debtor with a guarantor, or either the debtor or guarantor can use it to offer a written agreement to a creditor.

No matter which party is filling out this document, it should be done with care to ensure that the true terms of agreement between the parties have been captured. When it is all filed out, it should be printed and signed by the guarantor . Then, a copy should be made for the debtor and the creditor, as well.

Applicable law

Guaranty Agreements are covered by state-specific laws in each jurisdiction .

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.

Other names for the document:

Agreement for Corporate Guarantee, Agreement for Debtor Guaranty, Agreement for Loan Guarantee, Agreement for Personal Guarantee, Corporate Guarantee Contract

Country: United States

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COMMENTS

  1. PDF PN 544 dated November 12, 2020

    PROCEDURE NOTICE RD MANUAL CHANGES INSERT RD INS 440.1 (WSAL) INTEREST RATES, AMORTIZATION, GUARANTEE FEE, ANNUAL CHARGE, AND FIXED PERIOD. Exhibit B is partially revised to update the effective date to November 1, 2020. REMOVE Exhibit B: Pages 1 & 2 (Rev 11). RD HANDBOOK CHANGES RD HB-1-3555 (WSAL) Paragraph 6.2C: INSERT

  2. Understanding an assignment and assumption agreement

    An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

  3. RD 5001-6 Assignment Guarantee Agreement

    RD 5001-6 Assignment Guarantee Agreement ( ) ⚠️ Notice: This form may be outdated. More recent filings and information on OMB 0572-0155 can be found here: 2023-05-15 - No material or nonsubstantive change to a currently approved collection 2022-10-04 - No material or nonsubstantive change to a currently approved collection Document [pdf]

  4. Guarantees on lease assignment: implications for landlords and their

    The Court of Appeal has confirmed that, when a lease is assigned to a third party, the outgoing tenant's guarantor can guarantee the outgoing tenant's liabilities under an authorised guarantee agreement (AGA). In doing so, the guarantor can indirectly guarantee the incoming tenant's obligations.

  5. eCFR :: 7 CFR Part 4279 -- Guaranteed Loanmaking

    Assignment Guarantee Agreement. Form RD 4279-6, "Assignment Guarantee Agreement," is the signed agreement among the Agency, the lender, and the holder containing the terms and conditions of an assignment of a guaranteed portion of a loan, using the single note system.

  6. Understanding Authorised Guarantee Agreements

    The law on Authorised Guarantee Agreements is complicated, and is evolving as cases on the Landlord & Tenant (Covenants) Act 1995 (the "1995 Act") are working their way through the courts. Lawyers call leases "old" or "new", as referred to in the 1995 Act. Leases dated before 1 January 1996 (or granted pursuant to Agreements for ...

  7. PDF Assignment Guarantee Agreement

    The Lender has the option to repurchase the unpaid guaranteed portion of the loan from the Holder(s) within 30 days of written demand by the Holder(s) when: (a) the Borrower is in default not less than 60 days on principal or interest due on the loan or (b) the Lender has failed to remit to the Holder(s) its (their) pro rata share of any payment...

  8. What is an Authorised Guarantee Agreement?

    An Authorised Guarantee Agreement (also known as an AGA) is a document that a Landlord may require the existing tenant (the Assignor) to sign during a lease assignment, to safeguard the Landlord's position should the incoming tenant (the Assignee) fail to comply with the terms of the lease. The Assignor signs an Authorised Guarantee Agreement ...

  9. 7 CFR 5001.408 -- Participation or assignment of guaranteed loan

    The assignment guarantee agreement must clearly state the guarantee portion of loan as a percentage and corresponding dollar amount of the guaranteed portion of the guaranteed loan it represents and the lender's servicing fee. The lender cannot charge the Agency a servicing fee and servicing fees are not eligible expenses for loss claim.

  10. Guarantee Agreement: Definition & Sample

    A guarantee agreement is an agreement of a third party, called a guarantor, to provide assurance of payment in the event the party involved in the transaction fails to live up to their end of the bargain. They are common in real estate and financial transactions. The guarantor assumes all the risk because if the borrower fails to make the ...

  11. Authorised guarantee agreements

    An AGA is an agreement which places an obligation on an outgoing tenant to guarantee the performance by the new tenant or "Assignee" of the tenant covenants contained in the lease. If the Assignee fails to perform the tenant covenants in the lease (which include payment of rents and repair obligations) the AGA allows the landlord to pursue the ...

  12. PDF Assignment Guarantee Agreement

    ASSIGNMENT GUARANTEE AGREEMENT (Rural Business-Cooperative Service) 7 CFR part 4279, subparts A and B 7 CFR part 4287, subpart B 7 CFR part 4280, subpart B Capitalized terms will have the meaning defined in the applicable program regulations. Type of Loan USDA Loan Identification Number has made a loan to in the principal amount of $

  13. Guaranty Agreement

    Guaranty Agreement 0% Choose the state where the guaranty is being provided. This will likely be the state where all parties are (the creditor, the debtor, and the guarantor), but can also be the state where just the guarantor is located. ? Customize the template Guaranty Agreement State of Alabama

  14. Assignment; Guarantee of Obligations Sample Clauses

    Debtor and Developer must mutually agree to (a) extend or renew for any period this Agreement (whether or not longer than the original period) or alter any of the Liabilities, (b) release or compromise any Liability of the undersigned hereunder or any Liability of any other party or parties primarily or secondarily liable on any of the Liabiliti...

  15. Assignment Guarantee Agreement Sample Clauses

    Assignment Guarantee Agreement. If the lender assigns the guaranteed por- tion of the loan to a holder, the lender, holder, and the Agency must execute the Assignment Guarantee Agreement;

  16. Guaranty Agreement: Definition & Sample

    A guaranty agreement is a contract between two parties where one party agrees to pay a debt or perform a duty in the event that the original party fails to do so. The party who makes the guaranty is called the guarantor. An agreement of this nature is often used in real estate, insurance, or financial transactions.

  17. Assignment of Guarantee Definition

    Assignment of Guarantee means the assignment agreement between Nyrstar and Executive Park Funding LLC whereby Nyrstar agrees to become a guarantor under the Auramet Loan Agreement and Minas and the Corporation are released and discharged as guarantors under the Auramet Loan Agreement. Sample 1 Based on 1 documents

  18. Guarantees on lease assignment: implications for tenants

    The Court of Appeal has confirmed that, when a lease is assigned to a third party, the outgoing tenant's guarantor can guarantee the outgoing tenant's liabilities under an authorised guarantee agreement (AGA). In doing so, the guarantor can indirectly guarantee the incoming tenant's obligations.

  19. ASSIGNMENT GUARANTEE AGREEMENT

    ASSIGNMENT GUARANTEE AGREEMENT (Business and Industry and Section 9006 Program) Type of Loan FORM APPROVED OMB NO. 0570-0017 USDA Loan Identification Number 7 C.F.R. part 4279, subparts A and B 7 C.F.R. part 4287, subpart B 7 C.F.R. part 4280, subpart B of (Lender) has made a loan to in the principal amount of $ .

  20. Authorised Guarantee Agreement

    An Authorised Guarantee Agreement is needed for the assignment of the remainder of the term of a lease of business premises to a new tenant - "the assignee" - if the lease is classed as a new lease under the Landlord and Tenant (Covenants) Act 1995. This is normally any lease that a landlord granted on or after 1 January 1996.

  21. ASSIGNMENT OF GUARANTY Sample Clauses

    This Guaranty shall remain in effect in favor of the Creditor as to the portion of the debt not assigned. Sample 1. ASSIGNMENT OF GUARANTY. This Guaranty is for the benefit of Lender, its successors and assigns, and in the event of an assignment by Lender, its successors or assigns, of the Guaranteed Indebtedness, or any part thereof, the ...

  22. Guaranty Agreement

    A Guaranty Agreement is an agreement whereby loan or a debt of an individual is "guaranteed" by someone else. In other words, the party "guaranteeing" the loan or debt is agreeing to pay the amount owed if the person taking out the loan or debt defaults, or doesn't pay.