What is a personal guaranty in a NYC retail lease?

A personal guaranty in a NYC retail lease is a provision making the lease signer personally responsible for the tenant corporation's obligations under the lease. Without a guaranty, the lease is corporate-only and the landlord can only pursue corporate assets in a default. With a personal guaranty, the landlord can come after the individual signer's personal assets, including savings, salary, and real estate. The personal guaranty is the most negotiable clause in a typical NYC retail lease.

Can you negotiate the personal guaranty in a NYC retail lease?

Yes, the personal guaranty in a NYC retail lease is highly negotiable. Three common modifications. A good guy guaranty ends personal liability when the tenant properly vacates the space. A burn-off structure reduces personal liability over time, often hitting zero by year five. A capped guaranty limits personal liability to a defined dollar amount such as six or twelve months of rent. Most NYC institutional landlords accept at least one of these modifications. Private landlords sometimes push back.

What is a good guy guaranty?

A good guy guaranty is a lease provision that limits a tenant's personal liability on exit. Under a standard good guy clause, if the tenant vacates the space, gives required notice, leaves the space in good condition, and is current on rent at the time of vacating, the personal guaranty ends regardless of remaining lease term. The corporation may remain liable but the individual signer is off the hook after handing back the keys. Good guy clauses are the most common compromise in NYC retail lease guaranty negotiations.

What is a burn-off guaranty in a NYC retail lease?

A burn-off guaranty in a NYC retail lease is a structure where the personal guaranty reduces over time. Year one full personal liability. Year two 75 percent. Year three 50 percent. Year four 25 percent. Year five and beyond zero. The exact slope is negotiated. Burn-offs work well for tenants confident in early years and worried about long-tail personal liability. They also work for landlords focused on early-year credit risk who care less about late-year exposure.

What if a NYC landlord refuses to modify the personal guaranty?

A NYC landlord who refuses any modification of the personal guaranty is signaling something about how the deal will run. Most NYC landlords negotiate guaranty terms. Landlords who refuse to are often difficult on other issues as well. Tenants facing a hard no on guaranty should evaluate whether the space is critical enough to accept the risk. Sometimes the answer is yes. Often the answer is no, and walking away is the right move. Other spaces and landlords exist.

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Tenant & Landlord EducationJune 23, 20265 min read

Personal Guaranty Negotiation for NYC Retail Tenants

The personal guaranty is the most negotiable clause in a NYC retail lease. Here is how to actually negotiate it.

Jack Baum·Gravity Realty Group

The personal guaranty is the most negotiable clause in a NYC retail lease. Most tenants treat it like it is not. They sign whatever the landlord drafts. They later find out the guaranty was the most expensive part of the lease.

Here is how to actually negotiate it.

What a personal guaranty does

The personal guaranty is the lease provision that makes you personally responsible for the tenant company's obligations under the lease. If the corporation cannot pay, you can.

Without a guaranty, the lease is corporate-only. The corporation defaults, the landlord terminates and looks for damages from corporate assets. If the corporation has no assets, the landlord absorbs the loss.

With a personal guaranty, the landlord can come after the individual signer. Salary, savings, real estate. Whatever the guarantor owns.

The good guy guaranty

The most common compromise in NYC retail is the good guy guaranty. Under a good guy provision, the guarantor's personal liability ends when the tenant vacates the space, gives the required notice, leaves it in good condition, and is current on rent at the time of vacating.

The good guy clause turns an open-ended personal liability into a defined exit. You can hand back the keys without bringing down personal financial ruin. The lease continues to run for the corporate entity, but the personal piece ends.

Most institutional landlords in NYC will agree to a good guy clause. Some private landlords push back. Their concern is that the tenant will walk in year two of a ten-year lease and the landlord will be left with a vacant space. The good guy clause does shift some of that risk.

Burn-off structures

A burn-off is a structure where the personal guaranty reduces over time. Year one full guaranty. Year two 75 percent. Year three 50 percent. Year four 25 percent. Year five and beyond, zero. The exact slope is negotiable.

Burn-offs work well for tenants who are confident in years one through three and want protection for years four and beyond. They work best for institutional or well-capitalized landlords who care about the early-year credit risk and are less concerned about later years.

Capped guaranty

Another structure is a guaranty capped at a dollar amount. Six months of rent. Twelve months. Some defined number. The cap creates certainty for the guarantor. If the worst happens, you know your maximum personal exposure.

Capped guarantees are less common than good guy clauses but work well for tenants in higher rent corridors where the total lease obligation is large.

The negotiation tactics

Three things to know. First, lead with the good guy ask. If the landlord agrees, do not push for a burn-off too. You can take the win.

Second, if the landlord rejects the good guy, ask for a burn-off. The landlord's rejection of good guy is sometimes about not wanting an early walk. A burn-off addresses that concern directly.

Third, if both are rejected, ask why. Some landlords have a legitimate concern about the space being hard to re-let. In that case the negotiation moves to rent and TI rather than guaranty. Some landlords just say no because that is their default position. With those landlords, you push harder.

When to walk away

A landlord who refuses any guaranty modification at all is telling you something about how the deal will run. Most NYC landlords negotiate guaranty. The ones who refuse to are usually the ones who will be difficult on every other issue too. Sometimes the deal is worth the difficulty. Often it is not.

Read the broader tenant lease primer here for the rest of the structural terms that matter.

Frequently asked questions

What is a personal guaranty in a NYC retail lease?: A personal guaranty in a NYC retail lease is a provision making the lease signer personally responsible for the tenant corporation's obligations under the lease. Without a guaranty, the lease is corporate-only and the landlord can only pursue corporate assets in a default. With a personal guaranty, the landlord can come after the individual signer's personal assets, including savings, salary, and real estate. The personal guaranty is the most negotiable clause in a typical NYC retail lease.
Can you negotiate the personal guaranty in a NYC retail lease?: Yes, the personal guaranty in a NYC retail lease is highly negotiable. Three common modifications. A good guy guaranty ends personal liability when the tenant properly vacates the space. A burn-off structure reduces personal liability over time, often hitting zero by year five. A capped guaranty limits personal liability to a defined dollar amount such as six or twelve months of rent. Most NYC institutional landlords accept at least one of these modifications. Private landlords sometimes push back.
What is a good guy guaranty?: A good guy guaranty is a lease provision that limits a tenant's personal liability on exit. Under a standard good guy clause, if the tenant vacates the space, gives required notice, leaves the space in good condition, and is current on rent at the time of vacating, the personal guaranty ends regardless of remaining lease term. The corporation may remain liable but the individual signer is off the hook after handing back the keys. Good guy clauses are the most common compromise in NYC retail lease guaranty negotiations.
What is a burn-off guaranty in a NYC retail lease?: A burn-off guaranty in a NYC retail lease is a structure where the personal guaranty reduces over time. Year one full personal liability. Year two 75 percent. Year three 50 percent. Year four 25 percent. Year five and beyond zero. The exact slope is negotiated. Burn-offs work well for tenants confident in early years and worried about long-tail personal liability. They also work for landlords focused on early-year credit risk who care less about late-year exposure.
What if a NYC landlord refuses to modify the personal guaranty?: A NYC landlord who refuses any modification of the personal guaranty is signaling something about how the deal will run. Most NYC landlords negotiate guaranty terms. Landlords who refuse to are often difficult on other issues as well. Tenants facing a hard no on guaranty should evaluate whether the space is critical enough to accept the risk. Sometimes the answer is yes. Often the answer is no, and walking away is the right move. Other spaces and landlords exist.