Information Centre » Bank Guarantees
A bank guarantee is an agreement by a bank to pay a certain sum to the landlord on demand from that landlord when the tenant is in arrears under the lease. The bank does not have to check with the tenant whether or not it should make payment. The benefit of a bank guarantee is the ability of the landlord to call upon the bank guarantee and without having to resort to making demands and taking legal action.
In order to provide the bank guarantee the bank will require additional security from the tenant to cover the bank guarantee amount – in the form of a mortgage over a property or over a cash deposit (not over the business).
Landlords are now increasingly requiring bank guarantees over personal guarantees. Negotiate the amount of the bank guarantee. A landlord will obviously want as much as they can get. Six months seems to be a standard amount.
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Rory MacDonald - Partner rory@mllaw.co.nz +64 (9) 307 3324 |
Important: This information is provided as a guide only and is not intended to be legal advice. You are strongly recommended to consult the services of an experienced lawyer.
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P: +64 9 307 3324
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Auckland 1052
DX CP 31534
PO Box 37851, Parnell,
Auckland, 1152
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For any queries please email us at info@mllaw.co.nz
P: +64 9 307 3324
F: +64 9 307 3325
92 Parnell Road, Parnell,
Auckland 1052
DX CP 31534
PO Box 37851, Parnell,
Auckland, 1152