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 (800) 976-4904.
To learn more about how to franchise your business, get a free complimentary copy of “How to Expand and Grow Your Business Through Franchising.”
Important articles and information that you should know about commercial leases, include:
Franchising may be the next big step for your business and brand. So, how do you know whether or not you should franchise your business? How do you know if franchising is right for you? The answer depends on your business, your business goals, your personal goals, your budget and... 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
Are you a successful business owner? Are you looking for ways to expand your business? If so, this article will provide the answers you need to decide whether franchising your business is the right step for you. In short, franchising allows you, the franchisor, to create a relationship among several... read more
Under federal law, prior offering or selling a franchise in any state, franchisors are required to disclose a franchise disclosure document (FDD) to their prospective franchisees. In addition to federal law certain states, including the franchise registration states, require that franchisors register their FDD with the state. The legal documentation... read more
For very good reasons, the questions of “is my business franchisable?” and “can my business be franchised?” come up often. Assuming that you possess the right mindset and franchise goals (a topic that we discuss in a separate article) there are core franchise factors that either your business must possess... read more
Key strategies to accelerate franchise growth for startup and emerging franchisors In this webinar, franchise attorney Charles Internicola and Nick Powills, founder of No Limit Agency and 1851 Franchise, discuss key strategies to accelerate franchise growth through PR and digital media. Some topics include: Steps franchisors should take when it... read more
One of the biggest issues for emerging franchisors is not having a plan for insurance and system-wide protection. What do emerging brands need to know when they're starting off, who should they rely on, and how can they plan ahead? Get an insurance game plan to protect your franchise system... read more
Key strategies for developing the right logo & trade dress to drive franchise growth with branding and design expert Dan Antonelli. Dan is the author of ‘Building a Big Small Business Brand’ and is the creative director of the branding firm KickCharge Creative. Learn how to drive franchise growth and... 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.