QUESTION: As a tenant, what kind of limitations can be negotiated in a lease guaranty?
ANSWER: In many commercial leases, the landlord will require the owners of a tenant company to personally guaranty the tenant’s obligations under the lease. In negotiating such guaranties, the owners should request that their liability be limited to a certain amount of rent that is due after a default by the tenant (for example, their liability could be limited to one (1) year’s worth of rent). If this is not acceptable to a landlord, the owner could request that their liability be limited only if they voluntarily give back the premises to the landlord and not legally defend any eviction action. Depending on the amount of money that is being invested in the premises by the landlord, this proposal might be beneficial to the landlord since it will be able to re-lease the premises in a timely manner without having to spend legal fees in attempting to gain possession of the premises.
By: Scott C. Butler, Esq.
