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What Is a “Good Guy Guarantee”?

What Is a “Good Guy Guarantee”? by Jordi Fernandez

Most commercial leases are between the landlord and the commercial entity, not an individual. However, that does not mean the landlord has no recourse against individuals or, likewise, does not mean that an individual cannot be responsible for the lease obligations.

Most landlords will not agree to a lease without an accompanying guarantee by an individual guaranteeing the obligations of the lease on behalf of the entity. In some cases, the guarantee may be a “good guy guarantee.”

What is a good guy guarantee?

A good guy guarantee is a personal guarantee of a payment and performance under a lease, but it may limit the guarantor’s obligations under a lease. The terms of a good guy guarantee will vary from lease to lease.

In most cases, a tenant is expected to give some notice of a surrender and not have any outstanding debt conditions. These conditions may be conditions precedent to be released from the guaranty of the lease. If those conditions are complied with, then, depending on the language of the guarantee, the guarantor may be released from the balance of the lease.

In some cases, even the tenant will be released from the lease, but the lease should explicitly say this. If those conditions are not complied with, then the personal guarantor is usually still obligated to comply with the lease terms through the expiration of the lease terms.  In some cases, if the landlord re-lets the premises, those damages will be mitigated.

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