A Personal Guarantee in Commercial Real Estate

Have you heard of Personal Guaranatees (PG) in commercial real estate?

Most landlords will require a personal guarantee if your business is getting ready to lease a space. Most businesses will set up a new LLC to operate and protect themselves if things go poorly. 

And, while this protection is ideal for business owners, it’s not so great for landlords if for some reason business fails to pay rent, maintenance fees, or other related costs.

This is where personal guarantees come into the picture. A PG, usually signed by husband and wife, makes you personally liable for rent if the business cannot pay. 

On the broker side of things, a great broker should do their best to make the PG fair for both parties. For instance, on the tenant side, your broker should try to limit the PG to what a landlord has spent. On the landlord's side, your broker should protect the money they spend to get a tenant including commissions, free time, and tenant improvement money.

Make sense? 

If you have any questions or are interested in learning more about commercial real estate, reach out to me. I’d love to chat and answer your questions.