what a personal guarantee means on a lease.
You are promising to pay the tenant's obligations out of your own money if the tenant does not. Your own money means your salary, your savings, and anything else a judgment can reach.
The part most people miss is the length. A guaranty is usually drafted to outlast the lease term, survive renewals, and follow the lease if it is assigned to somebody else.
this page says what the words mean. it does not say what to do about them, and it is not legal advice.
where it turns up
commercial leases where the tenant is a new or small company, and residential leases where the tenant has thin credit or no local history. Also lease addenda that add a guarantor partway through, and equipment finance and small-business credit lines.
the clause, as it usually reads
wording of the kind these documents carry. it is written for this page, not copied from anyone's contract.
22. Guaranty
As a material inducement to Landlord to enter into the Lease, Guarantor
absolutely and unconditionally guarantees the full and punctual payment of Rent
and the performance of every other obligation of Tenant under the Lease. This is
a continuing guaranty and remains in effect until all obligations of Tenant have
been fully satisfied, notwithstanding any expiration, renewal, extension,
holdover, amendment, or assignment of the Lease, and without notice to
Guarantor. Guarantor is jointly and severally liable with Tenant and with each
other Guarantor. Landlord may proceed against Guarantor without first
proceeding against Tenant, exhausting any security deposit, or pursuing any
other remedy. Guarantor waives notice of default, presentment, and demand.
line by line
absolutely and unconditionally
These words remove the conditions a guarantor would otherwise expect. There is no requirement that the tenant be sued first, or that the company be wound up first. Nobody has to prove the money cannot be collected elsewhere.
The promise is not a character reference and it is not a backstop of last resort. It is a second person the landlord can bill for the same debt.
continuing, and the list that follows it
Continuing is the word that decides the length. A continuing guaranty is not spent when the first month is paid, and it is not tied to the original 12 or 60 months.
The sentence names what it survives. Above, that is expiration, renewal, extension, holdover, amendment, and assignment. So a lease renewed for another 3 years, or handed to a buyer of the business, carries the same guarantor into the new arrangement.
Without notice to Guarantor is the other half of it. The lease can be extended or its rent raised by amendment, and the guarantor is bound by the new number without ever being told.
jointly and severally liable with Tenant and with each other Guarantor
Severally means the whole amount, not a share. 2 guarantors on a $3,000 rent are not each on the hook for $1,500. Each is on the hook for $3,000, and the landlord picks who to ask.
Liable with Tenant means the guarantor sits alongside the tenant rather than behind it. The landlord can ask the guarantor first, on the same day, for the same sum.
without first proceeding against Tenant or exhausting the security deposit
This closes off the answers a guarantor reaches for. The guarantor cannot require the landlord to chase the company, take the deposit, re-let the space, or sue anybody else before the demand lands.
A guarantor who pays generally has a claim against the tenant for the money. That claim is against the tenant, and whether it is worth anything depends entirely on whether the tenant has anything left.
waives notice of default, presentment, and demand
Presentment and demand are the formal steps of asking for payment. Waiving them, with notice of default, means the first thing a guarantor hears about a problem can be the claim itself.
Some guaranties keep a notice requirement. Where it is kept, the guarantor learns of a missed month while it is still 1 month.
what actually ends a guaranty
2 things, normally. A stated end point written into the guaranty itself, or a release signed by the landlord naming the guarantor and the date.
Moving out, selling the company, resigning as a director, and the tenant handing back the keys are none of those. That is why a release, when there is one, appears as its own signed document.
the wording that changes it
the same clause does very different things depending on which of these it carries.
- continuing guaranty
- no end point. It runs through renewals and extensions until every obligation of the tenant is satisfied.
- this Guaranty terminates on expiration of the initial Term
- a hard stop tied to the first term. A renewal after that needs a fresh guaranty to be covered.
- Guarantor's liability shall not exceed an amount equal to 6 months' Rent
- a cap. The exposure is a stated number rather than everything the tenant owes.
- Guarantor is released upon surrender of the Premises with 90 days' prior written notice and payment of all Rent then due
- the shape often called a good guy guaranty. There is an exit, and the notice period and the paid-up condition are its price.
- jointly and severally with each other Guarantor
- each guarantor owes the whole amount. Removing these words leaves each owing a share.
- Guarantor consents to any amendment of the Lease without notice
- the guaranteed amount can change after signing. The guarantee attaches to the amended lease, at the amended rent.
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documents this clause sits in
whole examples, with the summary sign writes for each one.
what a lease addendum actually says
the other 8
what indemnify and hold harmless actually means · does an NDA expire if it has no end date · what joint and several liability means in a lease · can you cross out a clause before signing · how long you have to cancel after signing · what a binding arbitration clause means · what entire agreement means in a contract · what an automatic renewal clause means, and how to cancel