A lease guarantee is an official agreement signed by the landlord, the tenant, and a third party who fulfils the landlord’s financial standards. A lease guarantor acts as a financial mediator between the tenant and the landlord, and is accountable for the tenant’s defaults, preventing the renter from being evicted.
The goal of a lease guarantee is to safeguard both the landlord and the renter. If a tenant fails to fulfil a landlord’s credit standards, the landlord may suggest a lease guarantee, which, if properly arranged, should be mutually advantageous.
Who Can Make a Lease Guarantee?
You have various possibilities if you need someone to sign as a guarantor on your lease.
Corporations: The most prevalent sort of lease that requires a guarantor is retail, which is frequently already covered by a business. It’s not unusual for the company to guarantee the lease on behalf of the [entity, franchisee?] in this situation. The tenant’s assets will still be considered, but the new firm will already be protected from its larger competitors.
Banks: This may be your best alternative if you need someone to sign a lease guarantee for you and you aren’t automatically guaranteed under a business. Banks have a well-known reputation and credit history, and if there is a default, landlords can seek prompt encashment without resorting to legal action.
Individuals: A person can sign as your guarantee, but keep in mind that their assets as a self-employed person will be examined when they are regarded as your guarantor.
How to Reach an Agreement on a Lease Guarantee
In the long run, negotiating your lease guarantee can save you a lot of money. If you need to contest one of the terms of your lease later, keep in mind that inconsistencies will always benefit the tenant.
If you still need help, contact one of our skilled Tenant Representation Brokers to help you negotiate the finest possible lease terms.
Apart from that, here are a few things to think about before signing your lease guarantee:
- The lease guarantee’s coverage restrictions
- Date of expiration
- It should be limited to a specified cash amount.
- Set a limit on your obligation.
- When a financial benchmark is met, a lease guarantee is terminated.
Limited Guarantee vs. Full Guarantee
The most common type of lease guarantee is a “full” guarantee, in which the subject guarantor agrees to fulfil all of the tenant’s obligations under the lease throughout the lease, as well as any renewals or changes.
By no means is “full” coverage a common requirement of a commercial lease; each agreement has its own set of conditions that may necessitate varied degrees of guarantee coverage, leaving the breadth and extent of the guarantee open to negotiation and the possibility of a “limited” guarantee.