Given that it is relatively easy to forge a bank guarantee it is strongly recommended that the landlord or vendor
verifies the authenticity of the bank guarantee with the issuing bank as soon as the landlord or the vendor receives the bank guarantee.

What is a Bank Guarantee?
A bank guarantee is an agreement by a bank to pay to a named beneficiary a predetermined amount of money on demand by that beneficiary.
A bank guarantee is often given as security by purchasers or tenants of real property.

Bank Guarantees - as good as cash
In the case of tenants, landlords will more often than not, require a bank guarantee or cash from tenants as security for compliance with the tenant’s obligations under the lease granted by the landlord.

If a bank guarantee is given to a vendor in lieu of a cash deposit payable under a contract of sale of real estate, the
bank guarantee is the vendor’s security should the purchaser fail to perform its obligations under that contact. In either case, it is imperative that bank guarantees fulfil the purpose for which they are accepted by either landlords or vendors.

Does the Bank Guarantee comply?
Landlords and vendors should take care to make sure that the bank guarantee complies with the following fundamental rules:

1. The issuing bank must be an authorised deposit taking institution within the meaning of the Banking Act 1959 (Commonwealth) and its address for the purposes of making claims under the bank guarantee must be in the city where the landlord or vendor is located.

2. The favouree or beneficiary of the bank guarantee must be the landlord or the vendor (as the case may be). The favouree or beneficiary’s full and proper name and ACN or ABN (if a corporation) must be correctly recorded on the
bank guarantee.

3. The customer or persons on whose behalf the bank guarantee is issued must be identical to the person named as tenant or purchaser in the lease or contract of sale of real estate. If the tenant or the purchaser is a corporation the bank guarantee must correctly record that corporation’s ACN or ABN.

4. The purpose or subject of the bank guarantee must be expressed correctly and expressions such as “deposit bond” or “rental bond” should not be accepted.

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