So, when it comes to negotiating for a limitation on a lease guarantys duration, the key is to focus on how to find the point where the landlord is somewhat comfortable that the tenant can be trusted to stand on its own. I wonder what happens when my lease gets litigated cle materials prepared for the nysba, real property section, commercial leasing committee, lunch meeting november 2017 by michelle maratto itkowitz, esq. Good guy clause commercial lease good guy clause ny office. Tenant was required to be current with rent after august 1, 2011. Requirement of law generally, to be ls responsibility, at ls expense. Jul 29, 2016 if your business is forced to close, a personal guaranty on the lease could lead you down the road to bankruptcy court. The distinction between a good guy clause and a traditionalfull personal guarantee is that in a good guy clause an individuals personal liability ends when the space is vacated. A good guy clause will not however, relieve your corporation, the tenant, of its obligations under the lease.
Good guy clause law and legal definition a good guy clause limits the liability of the personal guarantor for a tenant when a lease is terminated early. Examples of how landlords strengthen a good guy guarantee. A good guy clause is a way to limit your personal liability under a lease guaranty. The clause generally provides obviously the specific language of your lease controls that if the tenant defaults on the rent, that the guarantor is only responsible for rentadditional rent, etc.
Limited personal guarantee of lease advantage title. Oct 03, 20 a personal guaranty will allow your landlord to seek to enforce any claims arising under the terms of the lease against your personal assets. Limited personal guarantee of lease to be used only when the acknowledgment is made in new york state state of new york, county of, ss. Based upon the language of the good guy guaranty combined with the case law, the tenant has failed to comply with the terms of the good guy guaranty and surrender date and thus the accrual of rent continued throughout the term of the lease june 30, 2015 for the following reasons. What is a good guy guarantee and why is it important. Good guy clause commercial lease good guy clause ny. If the tenant defaults on the lease, but is current on rent payments and surrenders the property in good condition, payment will not be sought.
A good guy guarantee in a business lease is a lease guarantee that is limited to past due rent but not future rent. Dec 03, 2015 the good guy clause protects the guarantor as well as the landlord. Article four of the united states constitution wikipedia. A good guy clause in a personal guaranty of a lease will limit your personal liability in the event you surrender the leased premises to the landlord prior to the expiration of the lease term. A couple of ways to eliminate this clause is to increase the security deposit. If a tenant breaks the lease, the landlord does have the legal right beyond just retaining the security deposit to take the tenant to court for the remaining obligation that they have left to pay on their lease. A guaranty is a promise by a thirdparty guarantor, to be liable for the contractual obligations of an obligor to an obligee. Litigation costs can wipe out any benefit of the good guy guaranty. Good guy guaranty for startup tenant culhane meadows pllc. On the day of in the year, before me, the undersigned, personally appeared. Who does the good guy guarantee clause protect in a.
The good guy guaranty will contain a provision whereby the guarantor is released from its personal liability by providing the landlord with xxx amount of prior written notice of a vacate date on which the guarantor guarantees that the tenant surrender possession of the leased property to the landlord in the condition required under the lease. Good guy clause law and legal definition uslegal, inc. A good guy guarantee is a clause typically found in commercial lease agreements in new york city also known simply as a ggc, the good guy clause helps tenants by limiting the amount of a security deposit and helps landlords to avoid a costly eviction process if the tenants stops paying their rent before the end of the lease. One of the vexing problems for landlords is the defaulted tenant that will not leave. Evictions take a lot of time and work for landlords, especially in a place like new york city. Here are some ways to limit a lease guaranty including by. Consequently, a savvy landlord may request a sufficient security deposit, plus a good guy guaranty from a principal or affiliate of the tenant. A good guy clause, typically found in rental agreements in new york city, is a provision that allows a tenant to be released from the liability of completing the agreed upon rental period, assuming the tenant vacates the rented space and leaves it in favorable condition. One can readily adapt this guaranty to become a partial guaranty or a good guy guaranty, depending on the business deal. This office lease form is a detailed guaranty where the guarantor absolutely guaranties to the landlord, its successors and assigns, the payment of all fixed rent and additional rent due as well as all listed obligations within this form.
The rise of the good guy guarantee in commercial leasing. Structuring commercial real estate lease guaranties. Jun 19, 2017 guarantees, good guys, and time to go essentially, a personal guarantee in a commercial lease is pretty much what it sounds like. A good guy guarantee is a personal guaranty frequently used in new york commercial leases. The good guy guaranty is just one of those documents that, if not carefully negotiated can sink the unsuspecting guarantor.
Since the rationale for the good guy guaranty is that the guarantor, as the principal of the corporate tenant, has sufficient control over the corporate tenant to cause the tenant to vacate and surrender the premises to the landlord without unnecessary delay, the good guy should then be off the hook if the lease is ultimately assigned to. If the tenant defaults on the lease but is current on rent payments and surrenders the property in good condition, payment will not be sought from the guarantor. What is a personal guarantee commercial lease and how to get. Many people often mistake the good guy guarantee as a cancellation clause when in reality this is not the case. For example, a good guy guarantor s liability might continue until six months after tenant has moved out and surrendered possession of the space, rather than immediately after those events have occurred. A guarantor promises to remain liable for a fixed portion of the term e. May 22, 2014 consequently, a savvy landlord may request a suf. The spirit of the good guy clause is a personal guaranty from either the principal or officer of the corporate entity that signs the lease, thereby making himher personally liable for the rent while the corporate entity occupies the space. You should read this complete guide and understand what you are getting into. For example, a good guy guarantors liability might continue until six months after tenant has moved out and surrendered possession of the space, rather than immediately after those events have occurred. That means if the business falls on some hard months or is ultimately unsuccessful, the landlord can sue you for any unpaid rent from the commercial.
The guarantee either appears as a clause in the lease or as a separate document by way of an exhibit to the lease a good guy clause is typically signed by the tenants principal, who personally promises to fulfill all the obligations under the lease. View clauses allowing landlord control over and access to the demised premises. Oct 22, 2018 a good guy guarantee is a personal guaranty frequently used in new york commercial leases. A good guy clause, typically found in rental agreements in new york city, is a provision that. A good guy clause limits the liability of the personal guarantor for a tenant when a lease is terminated early. Drafting tipmake sure that costs of enforcing good guy guaranty are not capped by the good guy language. It also empowers congress to admit new states and administer the territories and other federal lands. A good idea for landlords a good guy guaranty can relieve some of the landlords headaches when a commercial tenant defaults on its lease. The united states shall guarantee to every state in this union a republican form of government, and shall protect each of them against invasion. Limited good guy guaranty the limited guaranty made as of. Jul 02, 2012 a typical good guy guarantee requires one or more of the tenants principals or creditworthy affiliates to guarantee the rent and often other payment obligations under the lease.
Article four of the united states constitution outlines the relationship between the various states, as well as the relationship between each state and the united states federal government. A more formal name for a good guy guaranty is a holdover guaranty, because the intent of a good guy guaranty is to prevent a tenant from remaining in its premises long after the tenant has stopped paying rent, i. A ggc holds a tenant the good guy or gal personally responsible for making rent, even after their company has. Tenant was required to be current with rent after august 1. A type of limited guaranty that typically cuts off the guarantor s liability upon the tenants surrender of the premises i. Why you should include a good guy guarantee in your lease. Its now time to talk about a form of guaranty that is getting increased exposure the good guy guaranty. Signing a commercial lease with a good guy guarantee. Itkowitz pllc 26 broadway, 21st floor new york, new york 4 646 8221805.
Good guy clause a good guy clause is a limited personal guarantee. The rise of the good guy guarantee in commercial leasing transactions. View aggressive clause dealing with reentry and continuing access to the demised premises. This guaranty shall be governed by and construed in accordance with the laws of the state of new york. Unfortunately, the landlords perception of what obligations are covered by a good guy guaranty can be very different than the prospective tenants and guarantors view. May 26, 2016 make sure that good guy guarantor is liable for. Generally a good guy guaranty can be given by an individual or individuals that control the tenant occupant and certainly can be given by a corporate entity or its majority shareholders or limited liability company or its members. The good guy guaranty and personal guaranties under a.
Just as you do not have to sign a regular commercial lease guarantee, if you have the right negotiating leverage, you do not have to sign the good guy clause. This guaranty shall be binding upon guarantor, hishertheir successors and legal representatives, and shall inure to the benefit of landlord, its successors, grantees, legal representatives and assigns. The guarantee either appears as a clause in the lease or as a separate document by way of an exhibit to the lease a good guy clause is typically signed by the tenants principal, who personally promises to fulfill all the. A good guy clause, will at least allow let you to walk away from the lease obligations, to move on to better things. In the event the tenant ceases to pay rent, for whatever reason, the tenant will be a good guy and.
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