Defaults by commercial tenants are on the rise, so more landlords are asking for a guaranty as a condition of a lease. This can be a real burden for a tenant, and can sometimes endanger a deal.
However, a guaranty doesn’t have to be an “all-or-nothing” proposition. Often, a tenant can negotiate a partial guaranty that is more easily doable and still satisfies the landlord.
Some common tenant counter-offers include:
- A guaranty that expires after a certain time, such as three years, if the tenant hasn’t defaulted by then.
- A guaranty only up to a certain dollar amount or certain percentage of the tenant’s obligations.
- A guaranty that covers the tenant’s debts, but doesn’t include the tenant’s non-financial obligations.
Landlords are also sometimes willing to waive a guaranty if the tenant puts up a larger security deposit, or agrees to pay for some of the improvements that would normally be provided by the landlord.