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Limiting Personal Guaranty in a NY Commercial Lease Agreement May Not Be Enough

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

Date: 08/29/2009 | Category: Business Transactions | No comments

Obligations in Regard to the Guaranty of a Business Lease in New York

When dealing with "small business" commercial lease agreements‚ typically‚ the commercial landlord will require the "personal guaranty" of the small business tenant.  Since most small businesses are owned by corporate entities that do not accumulate or maintain substantial assets commercial landlords justifiably require individual personal guarantees.  

LIMIT YOUR LIABILITY WITH A "GOOD GUY CLAUSE"

To limit the scope of a small business owners "personal guarantee" the attorney for the tenant / small business owner will attempt to negotiate a "good guy" clause limiting the scope of the personal guaranty.  That is‚ the individual guarantee will be limited to past due rent and obligations that accrue "prior" to the corporate tenant satisfying certain notice and vacancy obligations.  The benefit of the "good guy" limitation is to limit the individual guarantee obligations to "past due" rent and not "future lost" rent. Unless expressly negotiated into the lease agreement itself‚ the good guy guaranty limitation will apply to the individual guarantor but not the corporate entity which will remain exposed to a potential claim by the landlord for future lost rent.

If your small business corporation maintains and accumulates assets and maintains business at multiple business locations then simply negotiating a "good guy" limitation into your personal guarantee may not be enough.  That is you must also protect your corporation from claims of future lost rent should you decide to terminate your lease early.

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