This article is the second in a four-part series that examines how litigation—and, more specifically, its results—can shape the evolution of best practices in the real estate industry. As noted in the first article (which discussed some of the hazards of statutes of limitations), because of the case law's influence on the way business is conducted, the ripples of a dispute can extend far beyond the facts of any single case.

This second article will focus on a common feature of many commercial lease transactions: the so-called "good guy guaranty." Recent case law counsels a fresh look at how such guaranties are drafted. Here's why.

Good Guy Guaranties

First, some background. A "good guy guaranty" is unique to commercial leasing, and is often used where the tenant is a single-purpose entity. The guarantor agrees to be liable for the monetary obligations of the tenant (such as the payment of rent, taxes, and other charges) for as long as the tenant actually remains in the premises. If the tenant defaults on any of those obligations but stays in possession, the guarantor must answer for them. But that liability continues only until the tenant vacates the premises—even if, under the terms of the lease itself, the tenant's liability may continue to accrue thereafter.