# Commercial Lease Personal Guarantee: Risks for California Business Owners

## Why landlords request guarantees

A landlord may require an owner to personally guarantee a tenant entity’s lease obligations, particularly when the business is new or thinly capitalized. The guarantee can expose personal assets even if the lease is signed by an LLC or corporation.

## Understand the scope of the promise

Determine whether the guarantee covers rent only or also operating expenses, restoration costs, attorneys’ fees, holdover rent, and other obligations. Check whether it is continuing, unconditional, or extends to renewals, amendments, assignments, and replacement premises.

## Negotiate limits that match the business risk

Possible protections include a dollar cap, a fixed term, a burn-off after timely payments, a limited good-guy arrangement, or release upon an approved assignment. Landlords may resist these changes, but the guarantee is often as important as the base rent.

## Consider default and notice mechanics

Some guarantees permit direct action against the guarantor without first pursuing the tenant. Review notice provisions, cure periods, waiver language, and whether the guarantor receives copies of default notices. The business owner should know when personal exposure can arise.

## Watch for changes after signing

Lease extensions, rent increases, assignments, and modifications may affect guarantee obligations depending on the document. Do not assume a guarantee automatically ends when the business is sold or the tenant vacates.

## Review the lease and guarantee together

A guarantor’s exposure depends on the underlying lease, including acceleration, indemnity, repair, and surrender provisions. Review both documents as a package, and negotiate an express written release when the intended guarantee period ends.

## When should you consult a California business attorney?

Consider obtaining legal advice before signing, issuing a formal notice, accepting investment funds, or committing to a transaction structure. The appropriate approach depends on the documents, the parties’ leverage, and the specific facts. Alex Nahai Law assists businesses with contract, corporate, financing, and transaction matters. Contact the firm to discuss your circumstances.

*This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship.*