THE liability of a guarantor in a tenancy agreement depends on the contents of the guarantee and the terms of the tenancy agreement. Where the duration of the tenancy is stated and can be renewed for a further period, the guarantee is extended and covers the renewal. Thereafter, provided the tenant remains in possession of the property, which is situated in a rent control area and was completed prior to 31.12.1999, the tenant becomes statutory and the statutory tenancy is not covered by the guarantee. In such a case, the terms of the tenancy agreement apply in the statutory tenancy, except those referring to the duration of the tenancy and the rent.
The law protects the statutory tenant to remain in possession of the premises as long as he pays the rent and complies with the terms of the tenancy agreement. The tenant can be evicted only under the provisions of the Rent Control Law. Where there is a guarantee for the payment of the rent until the delivery of the possession of the property to the landlord, it is valid until the expiration of the contractual tenancy. Where the tenancy agreement states the tenancy period or its renewal, with the exception of the automatical renewal, the guarantee is limited until the expiration of the renewal.
The issue of the guarantee in statutory tenancies was examined by the President of the Rent Control Court in a judgment issued on 4.10.2017, where she analysed the relevant case-law, releasing the guarantor due to the creation of statutory tenancy. In particular, the landlord claimed repossession of the premises from the statutory tenant company and the rents in arrear both from the company and its guarantor. The tenancy agreement provided for a tenancy period of two years; there was a clause for its automatical renewal for another year if two months prior to the expiration of the agreement neither of the parties gave the other a written notice.
After the expiration of the two years, the tenancy was renewed automatically for another year since no notice was sent. After the lapse of the third year, the tenant remained in possession of the premises and became statutory. The guarantor guaranteed together with the tenant compliance with the terms of the tenancy agreement and for the punctual payment of the rent until full payment and delivery of the premises to the landlord.
The court, analysing the legal aspect of the guarantee, stated that in the particular case, both the possibility of the renewal of the contractual tenancy and the period of the renewal were or should have been in the contemplation of the guarantor when he gave his guarantee. The court referred to case-law, whereby the Supreme Court in a similar case held that the tenancy agreement had as a potential conclusive time the expiration of the renewal period and not of the original tenancy period. The extension of the tenancy for a further period did not create a new agreement releasing the guarantor from his obligations. The Rent Control Court added that the obligation the guarantor undertook until delivery of possession of the premises to the landlord refers to the delivery of the possession according to the terms of the tenancy agreement.
The guarantor’s liability ceases when the tenant becomes statutory except where the tenancy agreement provides for an automatic renewal of the contractual tenancy in perpetuity. The statutory tenant’s protection to remain in possession lies with the law and the commencement of the statutory tenancy. Consequently, the court released the guarantor from his liability, since it ceased to exist when the renewal period expired; hence, he was not responsible to the landlord for the payment of the rents due.