What is a Lease Agreement Good-Guy Guarantee?
Good-guy guarantees in lease agreements are personal guarantees that are limited. That is if you personally guarantee the lease for your business location then your guarantee will be limited (typically) to past due rent or a set amount but not for the rent due throughout the entire term of your business lease.
The Parties to a Lease Involving A Good Guy Guarantee
In the typical small business lease agreement the parties involved are the:
- tenant who is typically a corporation or limited liability company; and
- individual shareholder / owner of the corporate tenant.
Since most small businesses do not possess substantial assets or a complete earnings track record most commercial landlords require their small business lease agreements to be guaranteed by the "individual" shareholder / owner of the corporate tenant.
What Should Be In A Good Guy Guarantee?
A "good guy guarantee" refers to the limited personal guarantee of the corporate tenant's individual owner. Although the form of this "good guy" guarantee is subject to variation it provides for the termination of the "individual personal guarantee" upon the satisfaction of the following "good guy" acts:
- providing the landlord with pre-notice of the termination / breach of the lease agreement;
- surrender of the business premises in good and proper condition; and
- satisfaction and payment of all past due rent and additional rent obligations.
The benefit of a "good guy guarantee" is that an individual guarantor will not be liable for "future lost rent" in instances involving the early termination / breach of the lease agreement.
Learn More About Commercial Leases
Important articles and information that you should know about commercial leases, include:
- What you must know about commercial Lease "Use Clauses";
- Why you Must Control the Lease Agreement "Build-Out Terms".
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