Personal Guarantees & Commercial Leases | Real Estate Lawyer

Personal Guarantees & Commercial Leases

Personal Guarantees

Are you in the process of setting up a new business or organization? Need help with all of the confusing contracts, clauses, and addendums?

Amanda B. Cook, Attorney at Law, is here to help!

PublisherAmanda B. Cook

Video Title: Commercial Lease Personal Guarantee

Location: Montgomery, Alabama

Publication Date: Mar 7, 2017

Video Duration: 4:17 min:sec

YouTube ChannelAmanda B. Cook, Attorney at Law

Should I Sign a Commercial Lease Personal Guarantee?

Learning Objectives:

  1. To understand the function of a Personal Guarantee addendum in a Commercial Lease in Montgomery, Alabama.
  2. Find out if you should sign a Personal Guarantee.

Video transcript (below):

Commercial Lease Clauses

“Hi Guys! This is Amanda B. Cook, your small business attorney in Montgomery, Alabama.

I am really excited to be doing a video series for you on clauses that you should look out for in commercial leases.

What is a Personal Guarantee?

The first thing I am going to talk to you about today is usually the last thing in a commercial lease, and it is often a separate document from the commercial lease, and it is called a Personal Guarantee. [1]

Please DO NOT ever, ever, ever sign one!

“Never sign a Personal Guarantee!” ~ Amanda B. Cook (Listen @ 00:44 »)

What is a Limited Liability Company?

You’re probably a savvy business person or a savvy entrepreneur.

And you know that you filed your paperwork for your business with the Secretary of State to form your LLC [2], or form your corporation, or one of the other business entity types they have available.

You took this step to create a boundary between your business debt and your personal assets.

How Does an LLC Protect Me?

So you opened up your LLC so that if anything happened and something, heaven forbid, made you incapable of paying your business debt, your business creditors could not come after your personal assets.

Assets like your house, your personal bank account, your car, and your investment accounts – anything else that you own personally that you are not using for the business purposes.

So you created that wall there to save your personal assets from this debt of this new business venture that you own.

What is a Personal Guarantee?

Now, what a personal guarantee will do, if you sign it, is entirely rip down that wall that you have created between your business debt and your personal assets.

It will destroy that wall, and it will mean that your home, your car, your personal bank account, and investments, can be levied by the landlord in case you default on your rent.


What if I Refuse to Sign?

Now, many people are concerned with “killing the deal” if they refuse to sign a personal guarantee.

“Montgomery, Alabama… is a tenant’s market!” ~ Amanda B. Cook (Listen @ 02:38 »)

Guys, in our market, in Montgomery, Alabama, it is a tenant’s market. [3]

There is plenty of commercial space out there whether you are looking for office space or retail space or restaurant space.

Many landlords want your business!

Ask Your Leasing Agent to Negotiate

Usually, all anybody has to do is just tell their leasing agent:

“Look, I am really uncomfortable signing this personal guarantee. I do not want to subject my personal assets to rent if I, for some heaven forbid reason, have to default on my rent payments. I do not want to do that.”

Usually, your leasing agent can help you negotiate not having to sign that personal guarantee.

“I’ve never had a landlord not let a tenant out of a personal guarantee…” ~ Amanda B. Cook (Listen @ 03:28 »)

Most landlords will let you out of it. Sometimes you have to get an attorney involved.

I have never had a landlord not let a tenant out of a personal guarantee just to get that tenant into that commercial space.

The Short Answer? Don’t Sign!

So, there you have it!

Now you know what that personal guarantee is designed to do.

Now you know that you should NOT sign it.

No representation is made that our services are better than the services of any other attorneys in Alabama [4], so you guys contact us if you need some real legal advice or someone to help you negotiate that commercial lease.

Also, if you want to hear our next video on picking the right commercial space for your business, click here to subscribe!



    1. According to Black’s Law Dictionary, a Personal Guarantee is “An arrangement in which a person becomes liable for the debts of another party, in case the other party fails to clear their dues on time.” – Website link » [↩]
    1. “LLC” is an acronym for Limited Liability Company. Learn more about organizing a Domestic Limited Liability Company by visiting the Official Website of the Alabama Secretary of State » [↩]
    1. Note: As of the date of this blog post.[↩]
  1. Disclaimer: “No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.” Visit the Alabama Rules of Professional Conduct Rule 7.2(e) [↩]
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