When doing business in Alberta or transacting with an Alberta party, it is extremely important to be aware of the requirements contained in the Guarantees Acknowledgment Act (the "GAA"). The GAA has its roots in the Great Depression era, is unique legislation among the Canadian provinces and territories, and represents one of the earliest Canadian consumer protection enactments. In spite of its octogenarian status, a lack of familiarity with the GAA can be disastrous due to the fact that personal guarantees are not legally enforceable in Alberta unless its legislative formalities are met. As recent amendments have changed the specific requirements under the GAA, we wish to clarify a few things in this post.
A personal guarantee is given when a person, other than a corporation, enters into an obligation under deed or written agreement to answer for another party's default or omission. Among other things, these include a personal guarantee of a loan and some forms of personal indemnification against project cost overruns or under a commercial lease. Generally, a form of personal guarantee may be present any time recourse exists against a third party individual. Subject to certain exceptions set out in the GAA, these guarantees are not legally enforceable in Alberta unless they have been properly acknowledged by the guarantor.
Due to amendments contained in the new Alberta Notaries and Commissioners Act, which came into force on April 30, 2015, a personal guarantee subject to the GAA is not legally enforceable in Alberta unless the guarantor acknowledges their executed guarantee in front of a lawyer, and the lawyer then examines the guarantor and must satisfy themselves that the guarantor is aware of and understands their obligation. Once satisfied, the lawyer may issue a certificate signed by themselves and the guarantor, making the guarantee enforceable. Prior to these amendments coming into force, this technical process could be performed by any lay notary public. Now, a guarantee acknowledgment made within Alberta must be administered by an active member of The Law Society of Alberta, and acknowledgments made outside Alberta must be completed by any lawyer entitled to practise law in that jurisdiction.
As an aside, we would like to note that an earlier version of the GAA amendments included a requirement that the lawyer certifying the guarantee acknowledgment be independent from any party benefiting from that guarantee. It is important to be clear that while a certificate of independent legal advice is often a distinct contractual obligation, the statutory requirement for independent legal counsel to administer all GAA guarantees was repealed prior to the amendments' coming into force.
Since the GAA is unique legislation among Canadian provinces, even established businesses may not be familiar with its technical requirements if their exposure to the Alberta market is recent. If you are obtaining a form of personal guarantee as a condition of a transaction, and the guarantee is executed, delivered, or may need to be enforced in Alberta, many potential issues are avoided by ensuring that the new GAA requirements have been complied with. Failure to do so could significantly restrict the value of the personal guarantee and your ability to enforce its terms in Alberta.
Maxwell is a partner in the Real Estate Group at Lawson Lundell and advises clients on all aspects of the commercial real estate and development industry, including the acquisition, disposition, financing, rezoning, subdivision ...
Based in Lawson Lundell LLP’s Calgary office, Dan works with both our Real Estate and Banking groups, assisting clients with a broad range of debt financing and commercial real estate matters.
In his real estate practice, Dan has ...
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