Personal guarantees on a commercial lease: what you are really signing

Updated October 27, 2026 · General information, not legal advice.

Many small business owners form an LLC or corporation so their personal assets are separate from the business. Then a landlord asks for a personal guarantee, and that separation largely disappears for the lease. This guide explains what a guarantee is, why landlords ask for one, and the common ways tenants try to narrow it.

How to use this guide: read it with your own lease or proposal open beside you. Lease labels and "standard" terms vary from property to property and from landlord to landlord, so treat everything here as a list of things to look for and questions to ask, not as a description of what your document says. When a section of your lease is unclear, ask the landlord or its representative to explain it in writing, and keep notes of what was agreed.

What a personal guarantee is

A personal guarantee is a separate promise, signed by you as an individual, that you will pay what the business tenant owes under the lease if the business does not. It may be a short document attached to the lease or a section inside it. If the business stops paying rent, the landlord may be able to pursue you personally for unpaid rent and other amounts the guarantee covers.

The scope depends on the wording. An "unconditional" or "full" guarantee can cover all rent for the remaining term, plus the landlord's costs to re-lease the space, attorney fees, and other charges. For a multi-year lease, that can add up to a large number.

Why landlords ask for one

From the landlord's side, a new small business has limited credit history and few assets. The landlord may be spending money on improvements, broker commissions, and free rent. A guarantee gives the landlord someone to collect from if the business fails. Understanding that motive helps you negotiate: the more you reduce the landlord's risk in other ways, the more room there may be to limit the guarantee.

Common ways tenants limit a guarantee

These are terms tenants commonly ask for. Whether a landlord agrees depends on the market, the property, and your business's financial strength.

Dollar cap. The guarantee is limited to a fixed amount, or to a set number of months of rent, rather than the full remaining term.
Burn-off (step-down). The guarantee shrinks or ends after a period of on-time payments, for example after the first two or three years without a default.
"Good guy" guarantee. Common in some markets. Liability is generally limited to rent and charges through the date you give proper notice, vacate, and return the keys in good condition. The exact terms vary widely, so read the notice and surrender conditions carefully.
Limited term. The guarantee covers only the initial term and not renewals or extensions, unless you sign again.
Larger security deposit or letter of credit instead. Some landlords will reduce or drop a guarantee in exchange for more upfront security.
Release on assignment. If you sell the business and the landlord approves a qualified buyer to take over the lease, the guarantee is released.

Clauses to read in the guarantee itself

Who is signing. Is it only you, or also a spouse or partners? Some guarantees are "joint and several," meaning each signer can be responsible for the full amount.

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What it covers. Rent only, or also repair obligations, indemnities, and legal fees?
Waivers. Guarantees often include waivers of defenses that a guarantor might otherwise have. These are worth understanding before you sign.
Amendments. Does the guarantee automatically cover later lease amendments, extensions, or expansions?
Survival. Does it continue after an assignment or sublease?

How a guarantee fits with the rest of the lease

A guarantee interacts with other terms. A long initial term increases exposure. A landlord's right to accelerate rent (demand all future rent at once) after a default increases exposure. Your obligation to restore the space at the end of the lease may be covered too. Read the guarantee alongside the default, remedies, and surrender sections. Our first commercial lease checklist lists the other sections worth flagging.

The best time to negotiate

The most leverage is usually early, at the letter of intent stage, before the landlord drafts the lease and before you have spent money on design or permits. If the LOI says nothing about the guarantee, the lease will usually include the landlord's standard form. Raising a cap or burn-off in the LOI puts it on the table from the start. See LOI vs. lease: what's binding.

Questions to ask

Is a guarantee required, or would a larger deposit work instead?
Can the guarantee be capped at a set number of months of rent?
Will it burn off after a period without defaults?
Will you accept a good-guy guarantee, and what notice is required to use it?
Does it end if the lease is assigned to an approved buyer?
Does it extend to renewal terms?

Frequently asked questions

Can I refuse to sign a personal guarantee?

You can ask, and some landlords will accept other security, especially from established businesses. For a new business, many landlords treat a guarantee as a condition of leasing.

Does forming an LLC protect me if I sign a guarantee?

Generally, an LLC does not shield you from obligations you personally guarantee. The guarantee is your individual promise.

Is a good-guy guarantee the same everywhere?

No. The name is informal and the terms vary. Read the notice period, the condition the space must be in, and what amounts remain owed.