Often times one of the most important elements of a commercial lease.
Please read the disclaimer at the bottom. This not intended to be legal advice, but rather information for you to discuss with your real estate attorney.
Not all Good Guys Guarantees are created equal. Good Guy Guarantees or often times referred to as limited guarantees were implemented to replace the full guarantees. This gives the property owner and tenant the ability to create ahead of time an exit plan just in case the business doesn't work out within the duration of the lease. Most of the time a commercial leases will have the name of the business as the tenant. This is common practice, but often times when a company opens a new retail or office location they open a separate corporation to operate the different elements of the business at the new location. Even if they have other locations the tenant will want to limit any liability from the new business to that particular business. So, the business open what we call in the industry a shell corporation. This shell corporation is new and fresh without any credit and the only assets it usually has is the money deposited in the new correlating bank account when opening the new business account. Without some sort of person or mother company that is willing to guarantee the lease, the landlord would be susceptible to losing all their upfront costs i.e. Rent concessions, Tenant Improvement dollars, Landlord work and opportunity loss. Remember the landlord usually goes into the red before ever receiving a dime as described above. In fact, that is exactly what the landlord is looking to avoid with a GGG. With a full guarantee, which is still used in certain instances, the tenant is on the hook for the entire term of the lease. If they left within a year the tenant would be responsible for paying back the entire 10 years. This was a killer in many instances and made it increasingly difficult to find tenants that would put their name on the hook for that much liability. This was bad for both the landlords and tenants. Often times with a full guarantee the tenants would not know what to do if their business didn't work out and everyone would suffer. The tenant and landlord would go months fighting in court and most of all the community suffered because the stores were closed and the store remained vacant. The Good Guy Guarantee was developed out of necessity. The fundamental principal is that if the tenant is a "Good Guy" meaning it was up to date with all payments, Gave the landlord a predetermined amount of notice to return the store usually 3-6 months notice depending on what type of business. Not all GGG are created equal. They are custom documents that are created to protect the landlord and tenant alike. This is a prevision of the lease that allows a shell corporation to be used as tenant on the lease and give the landlord a peace of mind that tenant will be a good guy and not leave the landlord with a huge mess. The actual prevision usually has a series of rules the tenant must follow before the guarantor is release from their responsibility. Again, not all GGG are the same, but some of the highlights are below.
Give Specified notice.
Not be in default.
Repay some of landlords upfront cost ( lawyer fee, brokers fee, concession time) this may only apply to unamortized rent and additional rent.
Tenant returns the keys to space after notice period in condition they received the space.
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