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A commercial tenant may need to provide a personal guarantee

On Behalf of | Oct 2, 2018 | Landlord / Tenant |

Signing a lease for a business space here in Orange County or anywhere else often requires more than just the renter’s word for payment. Since the collapse of the real estate market, more property owners want more than just a lease to ensure they receive their money each month. A commercial tenant may need to be ready to provide a personal guarantee.

Many small business owners choose an entity that limits their personal liability. This makes it counterintuitive to sign a personal guarantee for a lease, but in order to get the space they want it will probably be required. However, that does not mean that a tenant must simply sign the paperwork put in front of them.

Just like any other aspect of the leasing process, personal guarantees may be negotiated as well. It may be possible to limit the amount of personal liability a tenant would need to take on through the guarantee. In addition, many property owners do not necessarily need a guarantee long-term. It may be possible to shorten the term of the guarantee. After a specified time of on-time payments, a landlord may be willing to cancel the guarantee.

When a potential Orange County commercial tenant is asked to provide a personal guarantee for a lease, it would more than likely make him or her nervous. However, it does not have to feel as though a person is signing his or her life away in order to rent a space for a business. With good negotiating skills, a reasonable guarantee could be put together that satisfies the property owner’s need for security when it comes to payment and the renter’s need to know that his or her personal property and finances are not fully or permanently at risk.