It is good business practice for a commercial landlord to require the principal owners of the tenant business to execute a guaranty personally guaranteeing the obligations of the tenant business under the lease.
It is not uncommon for a landlord to state that their guaranty is a “standard” form. However, this is an unfortunate misconception since not all guarantees are the same.
There are different types of personal guarantees that provide commercial landlords with differing levels of protection.
There are absolute and unconditional guarantees and conditional guarantees. The distinction between an absolute and unconditional guaranty and a conditional guaranty is that one who undertakes an absolute and unconditional guarantee of payment by another becomes liable immediately upon default in payment by the other, while one who undertakes to conditionally guarantee another’s payment does not become liable until the occurrence of the specified conditions established in the guaranty. Whether a contract of guaranty is absolute and unconditional or conditional depends on the specific language utilized in the guaranty.
Additionally, there are several other important considerations when drafting a guaranty. For example, under Florida law a guarantor may waive its right to raise defenses in opposition to the enforcement of a guaranty. Thus, a commercial landlord may want to draft a guaranty that contains language that clearly and unambiguously waives any and all defenses to the enforcement of the guaranty to avoid expensive and lengthy litigation if it becomes necessary to file a lawsuit to enforce the guaranty.
Thus, the language used in a guaranty is critical and commercial landlords should consult with an attorney to at least review their “form” and even suggest changes to better protect their interest. At Rosenthal Law Group, our Florida business litigation lawyers are well-versed in preparing all types of commercial lease guarantees and, if need be, litigating them to enforce them against guarantors. For more information on how we can assist you, call our offices today.