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Exit & Transfer

Personal guaranty

Also called: lease guaranty, guarantor agreement

A personal guaranty makes an individual or a parent company liable for a tenant entity's lease obligations, so the landlord can pursue the guarantor directly if the tenant defaults. Full guaranties cover the entire remaining term; limited forms cap exposure by amount, by time, or by conditioning release on an orderly surrender.

Landlords ask for guaranties because most tenant entities are single purpose and thinly capitalized. Whether to give one, and in what form, is often the most consequential negotiation in a small tenant deal.

The forms, from most to least exposure

  • Full unconditional guaranty. Liability for all obligations for the whole term, including any renewal. Exposure equals the total rent obligation, which on a $9,000 per month ten year lease exceeds $1,000,000 before additional rent.
  • Capped guaranty. Liability limited to a stated dollar figure or a number of months of rent, commonly six to twelve.
  • Burndown guaranty. The cap reduces on a schedule as the tenant performs, often stepping down annually and terminating after year three or four if no default has occurred.
  • [Good guy guaranty](/glossary/good-guy-guaranty). Liability ends on a proper surrender rather than at the end of the term.

Terms to read carefully in the guaranty document

  • Waiver of notice and of the requirement to proceed against the tenant first. Standard, but it means the landlord can sue the guarantor without ever pursuing the tenant.
  • Continuing liability through amendments. A guaranty that covers the lease "as amended from time to time" binds the guarantor to changes they never saw. Limit it to the lease as it exists at signing plus amendments the guarantor consents to.
  • Survival of the guaranty after assignment. If the tenant assigns with landlord consent, the guarantor should be released.
  • Joint and several liability among multiple guarantors. Each is liable for the whole, not a share.

Getting out from under it

A burndown that terminates the guaranty on a clean payment record is the most achievable ask for a tenant with limited leverage, because it costs the landlord nothing if the tenant performs. Tie the step downs to objective conditions: no monetary default beyond a cure period, and delivery of financial statements showing a stated net worth.

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Related terms

  • Good guy guaranty

    A good guy guaranty is a limited personal guaranty under which the guarantor is liable for rent only until the tenant vacates the premises, surrenders them in the required condition, and pays everything owed through that date.

  • Security deposit burndown

    A burndown is a schedule under which a tenant's security deposit or letter of credit is reduced over time as the tenant demonstrates payment performance.

  • Assignment and subletting

    Assignment and subletting provisions govern whether and how a tenant may transfer its lease or hand possession to someone else, and on what conditions the landlord may withhold consent.

This page is general information, not legal advice. Review lease language with qualified counsel.