Who’s Personally Responsible? Understanding a Personal Guarantee on a Lease

Answer

Intro: A personal guarantee on a lease is a promise by an individual (the guarantor) to pay the landlord if the named tenant—often a business or a student—fails to meet lease obligations. The guarantee shifts potential financial exposure from the tenant entity to a real person and often determines whether a landlord accepts the lease at all.

Main part: Personal guarantees appear most frequently in commercial leases (new businesses or LLCs with limited credit) and in certain residential situations (student housing or renters with limited credit history). Guarantees vary in scope:

• Unlimited guaranty: The guarantor accepts full liability for all rent, damages, and expenses for the entire lease term (and sometimes renewals).
• Limited or capped guaranty: Liability caps at a fixed dollar amount, a number of months’ rent (commonly 6–24 months), or a defined period (e.g., first 12–24 months).
• Conditional or performance guaranty: The guarantor guarantees only certain obligations (rent but not legal fees, for example) or guarantees performance until specific milestones.

Key consequences to understand: a guarantor’s personal credit can be affected if the landlord pursues collection; landlords may seek expedited remedies (rent acceleration, damages, court judgments) against guarantors; and signing a personal guarantee can pierce the protection that corporate structures offer. Landlords typically request proof of ability to pay (credit check, income verification), and tenants often try to negotiate caps, time limits, or automatic release clauses after a period of on-time performance.

Final paragraph: Before signing, review the guarantee’s wording closely, negotiate limits or release triggers where possible, and keep documentation of any changes. Because guarantee language and enforceability vary, it’s advisable to consult a licensed attorney or your real estate representative to evaluate risk and protection options.