Last week we ruminated over some of the legal aspects of lease guaranties. Characterizing them as “legal” issues doesn’t do proper justice to the subject because all legal issues are, in fact, business issues as well – they are a proxy for talking about allocating risk. Nonetheless, lease guaranties implicate an even more obvious business issue – will there be limits on the guarantor’s liability, and if so, what will they be? This posting will explore some of the possibilities. On the other hand, the relative bargaining power of the parties will determine how useful the following ideas will be. [Read more…]
Here Are Some Ways To Limit A Lease Guaranty… Including By Being A “Good Guy.”
February 20, 2012 By 5 Comments
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What’s To Negotiate About a Lease Guaranty?
February 12, 2012 By 3 Comments
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At the outset, let us offer a premise – when someone agrees to give a guaranty, it is expected that other than specific, agreed-upon business or financial limits, the guaranty will be “come heck or high water.” Absent some specific agreement to the contrary at the time the deal is made, this means that a lease guaranty is to be one of payment, not of collection, and is to be unconditional (whatever those things mean). The words of art are: ‘absolutely, irrevocably, and unconditionally.” Basically, what has been bargained for is that if the tenant doesn’t pay or perform, the guarantor will be just as liable as if had been the tenant itself.
This doesn’t mean there aren’t a lot of items that are reasonably up for discussion, only that when one agrees to execute a lease guaranty, there isn’t supposed to be a trap door to sneak out through. On the other hand [Read more…]
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