In today’s commercial real estate market, uncertainty is about the only real thing that is certain. Between ever-changing consumer tastes, increased Internet shopping in lieu of customers traveling to brick-and-mortar retail stores, greater competition between national franchises and mom-and-pop shops, tighter availability of lender financing, and the uncertainty of a volatile presidential race heading into an election, the road ahead begs many questions without clear answers for commercial landlords. In this period of flux where landlords no longer enjoy the same position of strength and leverage as they once had over prospective tenants, it is critical to try and negotiate independent guarantees that best suit each particular deal and (hopefully) hedge against the downside of a potential tenant default and resulting litigation.
As with any other contract, lease negotiations are a process of give-and-take. In the world of personal guarantees, landlords have many options at their disposal, including a variety of full and limited guarantees that range in scope, coverage and duration. Below, we briefly highlight some of the particularities and nuances of guarantees that commercial landlords and their attorneys should bear in mind during lease negotiations.
Full vs. Limited Guarantees
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