Novice here, how common are personal guarantees in a lease?
My husband has been running a business out of our home for the last three years, and it has always been profitable. We recently went to look at a space we love, but the landlord is unwilling to give us a lease without a personal guarantee or even negotiate the terms.  We have asked for a shorter guarantee window (1 or 2 years) or a death and disability clause getting out of the lease if something tragic happens. 

Our position is that this should not be needed, since our last three years of finances show that we can easily pay the rent with our current sales.  At a minimum we are looking to negotiate down this item, but they seem unwilling.  This is really the first place we have looked at and can't tell if this is the norm or if the landlord is just an a\*\*hole. 

Of note, my husband can not get life insurance because he had a kidney transplant a number of years ago.  He is in good health and his kidney is stable, so he is not actually at an increased risk of dying.  Also, the landlord doesn't know this piece but i know that will be someone's suggestion, it is just not an option for us.
[{"id": "ijzm3j2", "text": "A personal guarantee from an unknown tenant with a relatively new business is going to be a requirement for 98% of commercial landlords.", "replies": [{"id": "ijzo1iq", "text": "Thank you u/LazarWolfsKosherDeli \\- do you think it is reasonable to ask for a death and disability clause? Are those generally included? It seems like a fair ask..., but what do i know?", "replies": [{"id": "ijzp4m1", "text": "While I don't necessarily think it's unreasonable, I will say that I generally advise my landlord clients that a new and unknown tenant raising issues with the guarantee is a red flag. \n\nMaybe consider \"Key Person\" insurance for the business to cover the two of you with a payout covering the lease value.", "replies": [{"id": "ijzpfcq", "text": "Gotcha, thanks so much for your input!", "replies": [], "depth": 4}], "depth": 3}, {"id": "ijzrxck", "text": "From a property owner's perspective, feel free to ask for any terms you like.  The owner may or may not be interested in those terms.  Also some bank financing may not allow the owner to accept certain terms.\n\nSpecific to death/disability... The thing is, when you sign the lease, the owner is committing that space to you for the term of the lease.  100%.  It's yours for the lease term as long as you hold up your side if the contract (by paying the rent.)\n\nIf you want any \"out\" during the lease term, for any reason, it unbalances the commitment.  You want the owner to provide you the space, but you'd like to be able to break the commitment early if certain things happen.\n\nI understand your perspective completely.  Nothing wrong with asking the owner.  I personally would not accept such a clause because I need stability on my end.  But this owner might.  So ask away and see what happens.  Good luck!\n\nAlso, just fyi, I have to personally guarantee every loan when buying property.  It's part of the game when you get into commercial property either as owner or tenant.  To not do guarantees you typically have to pay more, and the amount more is enough that most people just give the guarantee.", "replies": [{"id": "ik00lf3", "text": "I agree with you.  I also think that asking for a death/disability clause is a reasonable request, since the landlord's primary concern is probably the business tenant failing financially.  \n\nIf the landlord doesn't go for it, well, at least OP tried.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "ik070bd", "text": "Eh, around here it isn't that much. Many of the landlords just reject tenant's because personal guarentees are so hard to collect on anyway and landlord's are legally required to mitigate damages anyway.", "replies": [], "depth": 2}, {"id": "ik1ttf0", "text": "I had a very successful franchisee as a client until he sold out a couple years ago. He had a decade of great financials and double-digit locations. He signed a personal guaranty on the last space I helped him find, just like the first one.\n\nEven once you leave the realm of signing personal guaranties, you just wind up signing a corporate guaranty.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ijzni73", "text": "https://www.usinsuranceagents.com/life-insurance-for-kidney-transplant-patients/\n\nSays   \n&gt; If you\u2019ve received a successful kidney transplant and have maintained your health for at least three years, you might qualify for traditional whole or term life insurance coverage. You\u2019re also eligible for guaranteed issue life insurance with no medical exam. However, expect life insurance rates for kidney transplant patients to be slightly more expensive than average.", "replies": [{"id": "ijzo7nd", "text": "Thanks so much! I will take a look, i know we got one quote a few years ago and it was about 1K a month for a 500K policy.", "replies": [{"id": "ik2nqrv", "text": "Alternatively, you could offer the landlord a kidney.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ijzt1ir", "text": "100% of the time", "replies": [], "depth": 1}, {"id": "ik07l8g", "text": "You could offer a larger deposit in exchange. Are you getting TI\u2019s? If so, then there\u2019s very little chance the LL will do that deal without a PG. if it\u2019s an as is deal, then maybe.", "replies": [], "depth": 1}, {"id": "ik0htzm", "text": "For me it would depend on a few factors including but not limited to:  \n\n1.  Demand for the space (if your my only option. as a landlord I get a lot more flexible on certain terms.\n2. How much money is landlord investing in the space on your behalf (build-out, TI, broker commission).    Ultimately if I have no other options, I\u2019m looking for a guarantee that covers my carry cost (interest/taxes/opex) plus any initial capital outlay with interest.   That usually leaves me some room to \u201cburn down\u201d the guarantee over time.  I usually won\u2019t burn down to nothing, but landing at a 1-year rolling guaranty after 5 years (assuming I\u2019m made whole on my capital) and your sales are strong seems reasonable.\n\nIf you propose something that makes the landlord whole and is tied to your performance, you might find a reasonable response.", "replies": [], "depth": 1}, {"id": "ik0nja8", "text": "Put up a deposit or a letter of credit (same outlay but you can get a nominal return from the bank for the deposit amount) and then ask for a burn-off based upon the entity not being in default under the lease. Essentially do the right thing and be rewarded.", "replies": [], "depth": 1}, {"id": "ik0ovcq", "text": "Common type of guarantee is a \u201cgood guy\u201d guarantee. You aren\u2019t personally guaranteeing the entire term of the lease just that if there is a default by tenant, you guarantee rent payments until you vacate the space and return possession to the landlord. Along with that you might also expect to post several months 3-6 of rent as security that the landlord might  be able to use to pay those late payments or some as a sort of liquidated damages should the lease be broken. This is not legal or financial advice and you should absolutely consult a lawyer before entering into a commercial lease - it\u2019s no like a residential lease where some states may give you certain protections. Good luck!", "replies": [], "depth": 1}, {"id": "ik0supo", "text": "This is extremely common. You may be able to get out of it by providing a much larger security deposit or you could possibly negotiate a rolling guaranty.", "replies": [], "depth": 1}, {"id": "ik0wgu5", "text": "Unless the space has been vacant forever, it\u2019s extremely common. If you can easily pay the rent with your sales then I wouldn\u2019t worry about it in the first place. Put yourself in the landlord\u2019s shoes. Also, what happens in a sales downturn?", "replies": [], "depth": 1}, {"id": "ik13qto", "text": "Good points raised already.  Just to add, it depends on the investment in the space by landlord.  If there is zero work and you pay a larger security deposit, then maybe you can find common ground.\n\nAlso is business sellable should your health go sideways or have a life changing event.  So that landlord would have a tenant and you would walk away with something money wise.", "replies": [], "depth": 1}, {"id": "ik14oph", "text": "Are there any tenant improvement dollars being spent by the landlord?\n\nI\u2019ve been on both sides of this issue.  I\u2019ve also had it turn out differently.  If you are willing to share your financials for several years and there is no tenant improvement dollars being spent by landlord and you agree to say a 6mo deposit or something like that then You may have a better chance of removing the guarantee.  \n\nOthers have simply made it a requirement without room for negotiation because their financing Peters require it.  \n\nAlso, get a clause that allows subletting. In a worst case scenario, if you can\u2019t pay, you can try to sublet at market or below and at least only owe a smaller percentage of the total.", "replies": [], "depth": 1}, {"id": "ik1bhfg", "text": "I have been on both sides of this.  As a business owner looking for a place, I absolutely didn\u2019t want a personal guarantee involved mostly because what if another pandemic comes along.  I ended up buying a building and rent part of it, and as a landlord no way would I rent to someone coming out of a garage (like I did) without a personal guarantee.", "replies": [], "depth": 1}, {"id": "ik1fnnz", "text": " Wet common.  Particularly if the owner is an institutional landlord.  They have had several years of getting what they want and it will take a miracle to change their mind.   Same goes for many individual landlords however I jabbed had some success negotiating out of a PG with increased deposit and/or prepaid rent.  Good luck.", "replies": [], "depth": 1}, {"id": "ik1meka", "text": "I'm in my third commercial lease, all three have had personal guarantees.  \n\nI have not been a commercial landlord yet, but if/when I do, I would also require it.  I would not have rented to myself when I got my first tiny 1000/sq/ft warehouse.", "replies": [], "depth": 1}, {"id": "ik1und4", "text": "Only scenario where I wouldn\u2019t require a PG in your scenario is if I\u2019m putting $0 of TI in. Even then I\u2019d want at least a partial guarantee", "replies": [], "depth": 1}, {"id": "ik2kxk8", "text": "Extremely common as everyone here has said. I\u2019d direct you to look at two other points of negotiation. The first, is the ability to sublet the space with landlords consent, which shall not be unreasonably withheld. The second, is that the guarantee can be transferred to someone new if they have a reasonably same or better net worth, which again can\u2019t be unreasonably withheld.\n\nIf you believe the business is sustainable, then signing a personal guarantee should be a no brainer. I\u2019d be more concerned about if you a) sell the business or b) decide you want to wind it up and need to sublet the space to remove the rent liability.", "replies": [], "depth": 1}, {"id": "ik2ni0o", "text": "Your business isn't \"*seasoned*\" yet.\n\nDid you expect the world to end in February of 2020? No?  Neither did anyone else on the planet.\n\nDid you expect shelves to be empty in many stores across the country in November of 2020? No?  Neither did anyone else.\n\nDid you expect there would ever be a time when the government (or agencies) told you if you didn't take an experimental vaccine with no proof of concept, that you wouldn't be allowed to (insert insane expectations here: \\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_\\_).\n\nDo you know anyone who owned residential rental real estate between February 2020 and 10 months ago?  Do you remember them saying \"*this is just ridiculous!!! I can't collect rent because the tenant tells me they can't pay it but...they just bought a new car and a giant flat screen TV and I'm not allowed to evict them???\"*  Did you think that was fair that the landlord had to pay his taxes and mortgage but, had no income coming in by federal edict?  No?\n\nNeither did your friend who owned the real estate.\n\nThe world has changed in the last 3 years and the one thing people who own real estate have all said quietly...but in clear unison is: *\"No more Mr Nice Guy\"*.\n\nIf you'd been in business for 15 years, you might get away without a personal guarantee but, unless you're Microsoft...that's the price to play.\n\nAs to a policy that pays the landlord if you die (and your business goes south by virtue)....why do you feel it's the landlords responsibility to pay to repaint your space, move all your stuff out and deal with the fact that he invested millions for the asset you seek to lease, and now, for a reason far beyond his control (your death)....you simply stopped paying him for the asset he invested in.....for you.\n\nUnless you're his Mom, his daughter or his wife....it's a bit arrogant to assume that he should have to assume that responsibility....for you.\n\n(And for the record, if Microsoft wanted to lease from me, they would be offering some form of security due to the intense level of TI they would mandate so....yes, a personal guarantee .... and an insurance policy to protect my asset, is perfectly reasonable).", "replies": [], "depth": 1}, {"id": "ik32vlr", "text": "As a broker, I was okay with my wife signing a personal guaranty but I did insert a death or disability clause in the lease. The landlord agreed. Had they not agreed, I can't say with 100 percent certainly that we would have signed the lease or not. Having the primary tenant die seems like a legitimate reason to be able to cancel the lease.", "replies": [], "depth": 1}, {"id": "ik4d6f7", "text": "As a Landlord, i would not lease space on a non-recourse basis to a small user under any circumstances. Period.", "replies": [], "depth": 1}, {"id": "ik5cchj", "text": "In my market it's not uncommon for tenant's to start out term with a full guarantee and have it \"burn off\" to what we call a \"rolling guarantee\" wherein after a certain amount of time successfully staying in the space the LL can go after them for typically 6-18 months worth of forward rent if they dip out overnight all of a sudden.", "replies": [], "depth": 1}]