Many of our clients are asked to personally guarantee a lease for their business location. This is not an unreasonable request, especially when the client is a first time tenant and has no rental history. From the landlord’s perspective, the goal is to protect the landlord in the event the business fails to pay, goes bankrupt, or closes its doors, by then being able to have an individual pay the amounts owed by the tenant.
When we negotiate for our tenant clients, we try to eliminate any personal guarantee. If the personal guarantee is a non-negotiable point for the landlord, we try to limit the personal guarantee as much as possible. For example, we often ask the landlord to agree that any personal guarantee will only be in effect for the initial term of the lease and would not continue to be in effect during any renewal term. Sometimes, landlords will demand that the business owner’s spouse also personally guarantee the lease. It is always our preference to not have a spouse personally guarantee any obligation of a business, the lease included.
When renewing a lease that has been personally guaranteed, the tenant should request that the landlord relieve the guarantor of her/his obligations. So long as the tenant has fully complied with the lease, it is not an unreasonable request to have the landlord release the guarantor for any renewal term.
If you have questions about a current lease, new lease, or a lease renewal, contact the attorneys at Thomas Law Group to discuss what should or should not be included in your documents.