When you formed your company you probably did so, in part, for the limited liability protection it provides. Despite the limited liability a corporation, limited liability or other entity provides to its owners, when you are asked to sign a personal guaranty for the company’s lease, your home, cars and other personal assets are no longer protected from debt owed to the landlord. Unless your business has been in existence for many years, or you are otherwise wealthy, most landlords will require the company’s owners to sign a personal guaranty.
Rent on commercial space is often a company’s largest monthly expenditures. Landlords want to know that the lease will continue to be paid through completion, even if the company goes out of business. The landlord protects itself by requiring a personal guaranty, typically from every individual owning at least ten percent of the equity of the company.
While many landlords refuse to negotiate the terms of a personal guaranty, we always try to negotiate some concessions, including a limit on its duration or dollar amount or excluding certain assets, or negotiating alternatives to the guaranty.