Advantages of a Good Guy Guaranty vs. a Traditional Personal Guaranty

Most NYC commercial leases require some form of guarantee from the tenant. For smaller commercial tenants, this generally means a personal guarantee from one or more of the owners of the tenant company. This is generally in addition to a hefty security deposit typically provided through a Letter of Credit. A personal guarantee can be pretty onerous since it generally means the person (or persons) are individually liable for any payments the tenant might owe to the commercial landlord. Under NYC commercial leases, a tenant is legally obligated for all the rent due under the lease, even if the tenant vacates the space long before the end of the lease term. There is a less-onerous type of personal guarantee that is often offered in NYC commercial leases called the “Good Guy Guaranty” (“GGG”).

A GGG can be a clause in a larger NYC commercial lease, or it can be provided as a stand-alone document. Like a traditional personal guarantee, a GGG is a personal undertaking by somebody — usually the owner of a commercial tenant — to guarantee the obligations of a commercial tenant under a commercial lease. However, a GGG is much narrower in scope. A GGG is NOT for the whole term of the commercial lease but ONLY for the time the commercial tenant is in the space. During that time, the Good Guy guarantor is obligated to pay the rent and other fees, costs, and payments specified in the GGG. Once the commercial tenant has vacated, typically, obligations under the GGG terminate.

Obligations of Tenant taking advantage of a Good Guy Guaranty

Aside from vacating the premises, usually, a GGG also requires that the commercial tenant:

  • Give notice to the commercial landlord that the tenant will be vacating (as of a certain date)
  • Be up-to-date on other obligations (such as payment of utilities) and
  • Delivered the premises to the landlord in “broom clean” condition and without damage

The required notice is often three to six months, but the amount and method of notice are subject to negotiation. Note that “in possession” legally might mean “until the end of the Notice period” even if the tenant physically vacates sooner.

For obvious reasons, a Good Guy Guaranty is beneficial to NYC commercial landlords since a GGG provides a great incentive for a peaceful surrender of the commercial space in an undamaged and relatively clean condition. This allows the commercial landlord to take possession of the space and begin seeking a new tenant. Further, the commercial landlord still retains the right to sue the tenant for the unpaid rent and other obligations for the full term of the lease. But, litigation is a timely process; while litigation is pending, the landlord has possession.

For equally obvious reasons, a Good Guy Guaranty is beneficial to any person (or persons) who are guaranteeing the tenant’s obligations. Instead of being personally liable for the tenant’s obligation through the whole term of the lease, the individual is only responsible while the tenant is in possession (assuming the other conditions have been met).

Contact the NYC Commercial Lease Negotiators at Wright Law Firm NYC Today

For more information, call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC. We provide top-tier commercial real estate legal services for the NYC business community. To schedule a consultation, contact our office by e-mail or call us at (212) 619-1500.