What Is A Good Guy Guarantee?

An example of one of the things that you want to understand that the leasing stage is what is a good guy guarantee? It’s a term that that’s typically thrown around the lot and that people don’t really understand what it means or what the importance of it is.

Typically with a new business or a business that’s sort of not quite large with a lot of assets. The landlord wants some security, not only in the form of a security deposit, which is going to sit in the bank account, but also some security to have things don’t go well with this business that they’re not going to have to run to court, file a lawsuit to get the tenant evicted, which can take many, many months.

So a good guy guarantee is essentially saying to a landlord, look, I’m an owner of the business where I otherwise have control of the business. And if I’m not doing well as the business owner and the business isn’t doing well, I’m going to say to you, I’m going to be a good guy. Here are the keys. Take the space. You don’t have to kick me out of it. You don’t have to go to court to evict me. I’m going to give you this space back so you can go ahead and re-rent it. And in exchange for that, as a good guy guarantor, I’m not guaranteeing the entirety of the lease, I’m just guaranteeing the portion of when I turn you the keys over and vacate the space.

So if there was rent outstanding to that date, as a good guy guarantor, I’m responsible for paying it. But if there was, let’s say 3 years left on the lease and my business is going out of business, I’m not responsible personally for the remainder of that lease, the landlord has the space back, they could go and re-rent it. We’ll lease it to somebody else.

And if your business wasn’t doing any well anyway, it’s not like they could go after that business for the balance of the lease. But the important part is the good guy guarantor is off the hook as soon as they turn over the keys and otherwise comply with the terms of the lease prior to the date of surrendering it.