Good Guy Guarantees
Good Guy Clause/Personal Guaranty
Landlords include a “Good Guy Guaranty” in the vast majority of New York City commercial leases. The “good Guy Guaranty” is a very 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”.
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 a lease and leave a space before the end of the lease term, the “Good Guy Guarantor” is has no financial obligation so long as the tenant (the company) is not behind on their rent at the time they leave their space. On the other hand, if the tenant (the company) stops paying rent and is behind on their rent at the time that the landlord recovers the space, the Good Guy Guarantor becomes financially responsible to the landlord for the period of time the tenant occupied the space without paying rent. However, was the tenant (the company) leaves the space broom clean and turns in the keys to the landlord, the guarantor is no longer financially responsible for rent payments even if there is time remaining on the lease term.
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 and this translates into a reduced rent for the tenant.
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.