Commercial Landlord/Tenant Law |
Good Guy Guaranty: A Good Idea for Landlords
A Good Guy Guaranty can relieve some of the landlord's headaches when a commercial tenant defaults on its lease.
the vexing problems for landlords is the defaulted tenant that will not leave.
landlord may have rented office or retail space to a small business. Everyone
hopes and believes all will be well. Everyone is often wrong, and the business
hits financial bad times. While they are circling the financial drain, the
tenant stops paying rent but refuses to voluntarily vacate. Or, after they fail
completely, they abandon the premises, leaving behind furniture and fixtures
that the landlord neither owns nor wants.
this sad dance the landlord has some rights that are very solid and expensive
to enforce. When rent initially stops, the landlord can change the locks and
retake possession. But that entails expenses for locksmiths, security and, of
course, attorneys to post the proper notices.
tenant has abandoned or been locked out, the landlord can take possession of the
premises and its contents. But there are very specific legal requirements about
protecting that unwanted personal property, properly storing it, and eventually
disposing of it. The landlord may also be exposed to liability if a third
partys property (e.g., a leased copy machine) is lost or damaged while it is in
tenant is a corporation or LLC, and if the landlord agreed to execute a lease
without personal guaranties, the tenant is essentially judgment-proof.
short, this is a landlords nightmare.
Good Guy Guaranty
a middle ground, and it is one that should be utilized more often.
inception of the lease, when the parties are on good terms, most tenants will
agree to sign a Good Guy Guaranty: a limited personal guaranty by the
principals of the tenants that, while acknowledging there is no personal
liability for performing the ordinary terms of the lease, does impose a personal
but limited guaranty.
tenants principals covenant that the landlord can reclaim the space (regardless
of the reason for the lease termination) in substantially the same condition as
when rented, and within a stated time of that termination. If they refuse to go,
or leave it in disrepair, they still will not be liable for all future rent, but
the landlord can collect from the individuals for costs of repair and cleanup,
storage and disposal of the abandoned personal property, as well other expenses
for attorneys, locksmiths and the rent that was lost while the property was
being made marketable again.
a Good Guy Guaranty, the principals of the tenants promise to be good guys, and
that is a good idea. The renters are satisfied, in that it is clear they are not
personally responsible for the orderly termination and vacating of the premises,
and the landlord has some assurance that he will spend less time and money
getting possession after the lease has ended.