Expect a “Good Guy Guaranty” in Your New York City Commercial Office, Loft Retail, or Medical Space Lease
Landlords include a “Good Guy Guaranty” in the vast majority of New York City commercial leases for office, loft, retail, and medical space. The “Good Guy Guaranty” is a limited form of personal guaranty. It is a guaranty of payment not of term. Usually an owner or principal of a company will sign the “Good Guy Guaranty”. The “Good Guy Guaranty” will be a separate agreement at the end of the lease or as a clause within the rider
A “Good Guy Guaranty” Differs From A Personal Guaranty of The Lease in The Sense That It Is Guaranty Of Payment Not Of Term.
Should the tenant (usually a corporation) break their lease and abandon their space before to end of the lease term, the “Good Guy Guarantor” has no financial obligation provided the tenant (the company) is current on their rent when they leave their space. On the other hand, if the tenant (the company) stops paying rent and is behind on their rent when the landlord recovers the space, the Good Guy Guarantor is financially responsible for the tenant’s period without paying rent. The guarantor is not liable for future rent payments if back rent is not owed when the landlord recovers the space, the space is in “broom clean condition,” and the tenant has returned the keys to the landlord.
“Good Guy Guaranties” usually contain a notice period. It usually requires the tenant to give the landlord three to six months’ written notice before abandoning their space. Notice is required to allow the landlord time to find a new tenant and mitigate their financial loss. The amount of required notice is a term negotiated by the tenant’s commercial real estate broker. Negotiating the least amount of notice is beneficial to the tenant.
The Good Guy Guaranty Offers Benefits To Both The Tenant And The Landlord.
Having the guarantor reduces the likelihood of a tenant remaining in a space should a rent default occur, obviously a plus for the landlord. The Good Guy Guaranty makes the landlord feel more secure, which translates into a reduced security deposit for the tenant.
Good Guy Clauses can be complex and vary from lease to lease. It is advisable for attorneys representing tenants to review Good Guy Clauses very carefully. The tenant representative, real estate broker representing your organization should also have an in-depth understanding of these limited guarantees since they are critical business terms that are part of the initial negotiation for a potential commercial space.
Do New York City Landlords Always Require a Good Guy Guarantor for Commercial Real Estate Leases?
Landlords usually exempt large organizations from the need to provide a Good Guy Guarantor. When no individual has a majority interest or ownership stake in a business, one in the organization is willing to sign such a guaranty. Landlords recognize this and do not require government organizations, public corporations, or large non-profit organizations to provide a Good Guy Guarantor.
Good Clauses can be complex and vary from lease to lease. It is advisable for attorneys representing tenants to very carefully review Good Guy Clauses.
Contact Principal Broker Alan Rosinsky of Metro Manhattan Office Space to discuss the real estate implications of a “Good Guy Guarantee” at (212) 444-2241.