Personal guarantee
I’m leasing a store and landlord require personal guarantee, is that normal ? And anyway to avoid it ?
[{"id": "ew30zeq", "text": "Ya, you could rent a different store.", "replies": [{"id": "ew327px", "text": "I like the location for the store, is it normal for commercial lease terms to ask for personal guarantee ?", "replies": [{"id": "ew32adp", "text": "Sure if that\u2019s what he wants.  It\u2019s his building.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ew335wd", "text": "Pretty normal- depends on market and location though", "replies": [], "depth": 1}, {"id": "ew33a4d", "text": "yes - normal and no - you cannot avoid it unless you are a larger company with a proven track record or find a mom and pop commercial property owner that does not know what they are doing.", "replies": [], "depth": 1}, {"id": "ew3c8sm", "text": "Yes, very common nowadays. Read it very carefully and find out what you\u2019re personally liable for in the lease. Try and negotiate away some of the personal guarantee provisions.", "replies": [], "depth": 1}, {"id": "ew3umm0", "text": "I always require it for single location or newish type businesses. Company financials work instead of they have several locations and the lease entity is same as the company entity.", "replies": [], "depth": 1}, {"id": "ew3vhdv", "text": "Yes very common. Where I work it\u2019s 80% of the tenants unless your a national chain (that isn\u2019t a franchise)", "replies": [], "depth": 1}, {"id": "ew46ct6", "text": "This sort of guarantee is fairly normal (I represent a F500 company and they get asked for it all the time - I laugh, but they still get asked).\n\nThe point of the guarantee is to provide some extra security to the landlord. Usually, the \"tenant\" is a corporate entity of some sort (LLC, Inc., etc.) and the leased location is the only location and only assets of the entity - so, if the entity fails, there is nothing for the landlord to go after to get reimbursed for landlord's losses. Also, there is an \"emotional\" aspect - it is easier to cut and run on a company, but if that impacts your family name, it is harder to just walk away.\n\nSo, with that in mind, you can see as others have indicated that it will be difficult to avoid giving this guarantee (if those circumstances apply to you). If you want to try to avoid it, look into the following:\n\n1. Provide landlord with asset information for you entity to show that there is sufficient financial backing to cover landlord's potential losses in the event you default. If you can show you are \"good for it\" the landlord may be willing to pass on the guarantee (this is what I do for my F500 company to get the landlord to back off)\n\n2. Offer to provide more cash  for a security deposit. If landlord is holding cash, that is better for him than a guarantee. Of course this is a big cash outlay for you and I think a guarantee is better business-wise than losing control of the cash, but it is an option. Question is whether or not you can get the deposit amount high enough to sway the landlord\n\n3. Offer a letter of credit from a bank. This is similar to the \"increase the deposit\" option but instead of cash, you provide landlord with the ability to draw from a bank loan. You'll have to get a bank on board for this though and in many instances the bank will want a guarantee  from you to do it, so it may not be a viable option.\n\nAnd, here is a wild idea that could really backfire, but something to think about - you can always prove how worthless a guarantee would be by showing that 100% of your personal assets that are collectible are tied up in your company, so if the company goes bust, so do you and he will be trying to get blood from a stone. I don't recommend this because it could lead to the landlord deciding you are not worth the risk and he won't lease to you at all - but I thought I'd throw it out there.", "replies": [{"id": "ew56ske", "text": "Thanks a lot for the valuable info", "replies": [], "depth": 2}], "depth": 1}, {"id": "ew47ii0", "text": "You most likely have to accept it, but try and put a time limit on it. \n\nSay for the first three years for example or it goes away upon renewal.", "replies": [], "depth": 1}, {"id": "ew4nk2u", "text": "Absolutely normal - part of my job is to do credit reviews for prospective tenants and we always require full personal guarantees to approve the lease. Occasionally a corporate guarantee will suffice but that is only if it is national tenant usually. Every situation is also different. If there are not a lot of TI $ put into the space you can possibly get a personal guaranty that converts to a 12 month rolling guaranty after x amount of years.", "replies": [], "depth": 1}, {"id": "ewbgr5b", "text": "Do you have a broker working for you?", "replies": [{"id": "ewdx91k", "text": "No I don\u2019t", "replies": [], "depth": 2}], "depth": 1}, {"id": "ex2veo7", "text": "If we don't do a lot of TI or no TI at all, sometimes we will consider no PG with strict terms on getting the space back should any payment be missed, and space improvements become ours (usually we have this there anyway).", "replies": [], "depth": 1}]