Call Today: (800) 976-4904
Anyone who’s looked at a business rental agreement in New York City has heard of the “good guy guarantee.”
The guarantee is part of the rental agreement that allows a tenant to be released from a rental agreement early if they vacate the space and leave it in a favorable condition.
The good guy guarantee has been popular in New York in business rental agreements for several years. A typical good guy guarantee requires a creditworthy tenant (usually principal in the tenant’s business) to guarantee the rent obligations under the lease through the date the tenant surrenders the leased space back the landlord.
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 typically limited to past due rent or a set amount but not for the rent due throughout the entire term of your business lease.
The guarantee was first created by landlords to motivate tenants to avoid landlord-tenant litigation cases.
Here’s how it works.
If you’re a tenant and your business fails, but you vacate your space and pay rent through the date you vacate, you’re a “good guy.” A good guy clause limits the liability of the personal guarantor for a tenant when a lease is terminated early. If the tenant defaults on the lease, but is current on rent payments and surrenders the property in good condition, payment will not be sought. The guarantee provides that the landlord WILL NOT enforce rental agreement penalties as long as the tenant vacated the premises and paid all rent up to the date of termination.
In the typical small business lease agreement the parties involved are the:
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.
It’s important when negotiating a good guy guarantee that a tenant’s attorney include provisions allowing for the release of tenants from the rental agreement if the business closes or is sold, or if an assignment of the lease happens.
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:
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.
All parties in a rental agreement should develop a clear understanding of what the good guy guarantee should and shouldn’t include. An experienced business lawyer can help you set up the basic provisions of the good guy guarantee.
For more about how Mr. Internicola and the attorneys at The Internicola Law Firm, P.C. assist clients in business space rentals, call us at (718) 979-8688.
Important articles and information that you should know about commercial leases, include:
With services to make your growth strategy simple, cost effective, and with a team excited to help you, let’s talk about how we can help grow your brand. Click on the button below or call us at (800) 976-4904.
Are you a franchisor or a part of a franchise sales team? Do you want to learn more about franchise sale compliance and ensure that your sales practices comply with franchise laws and are consistent with best practices? Then this guide is for you. In this guide you’ll learn the... read more
In this guide you’ll learn the basics of franchising, how to franchise your business, and how to win at franchising. We’ll also take a deeper dive into legal requirements for franchising and why they matter, steps to take before and after you launch your franchise, and even some tips on... read more
When considering expanding a business both franchising and licensing are possible options. In this guide, you'll learn the differences of franchising and licensing and understand how each will affect you. read more
With services to make your growth strategy simple, cost effective, and with a team excited to help you, let’s talk about how we can help grow your business.
Fill out the following form and we’ll contact you as soon as possible. To reach our team directly, give us a call at (800) 976-4904.
An attorney client relationship is not established by submitting this initial contact information.