Short answer: A personal guarantee is a promise, signed by you as an individual, to pay your business's lease if the business doesn't. It cuts through your LLC: if the business fails, the landlord can come after your savings, home equity, and personal accounts. Almost every small-business landlord asks for one. What you can negotiate is how much it covers and when it ends.
Personal Guarantee on a Commercial Lease: What You Could Owe and How to Limit It
From a real, SEC-filed restaurant lease · Exhibit E · Guaranty
What a personal guarantee covers
When you sign a lease as "ABC Bakery LLC," only the LLC is the tenant. A personal guarantee is a second, separate contract: you promise to cover what the LLC doesn't pay.
An unlimited guarantee usually covers far more than base rent. Read the guarantee for each of these:
- All remaining rent for the full term, and sometimes renewal terms too
- Pass-through charges: CAM, property taxes, and insurance
- Accelerated rent if the lease lets the landlord demand all future rent at once after a default
- Holdover rent, damages, and the landlord's legal fees
- Obligations after an assignment, if the guarantee survives when you sell the business
Watch for a waiver of defenses. Language like "Guarantor's obligations are unconditional and shall not be subject to any defense, setoff, or counterclaim, including any breach by Landlord" means you stay liable even if the landlord breaks the lease first. Push back on "unconditional" wording.
Your LLC won't protect you
Many first-time tenants believe signing through an LLC protects their personal assets. It doesn't, once you sign a guarantee:
- The guarantee is a separate contract. The lease is between the landlord and your LLC. The guarantee is between the landlord and you, individually, and the LLC's shield doesn't apply to it.
- A new LLC has no credit. With no assets or operating history, the LLC alone gives the landlord no real security. That's exactly why they ask for the guarantee.
Check the signature pages. If there's a separate guaranty page or exhibit with your name signed as an individual, the LLC gives you no additional personal protection.
When a company can guarantee instead of you. If a parent or affiliated company has real assets and financial statements, offer a corporate guarantee in place of a personal one: the company is liable, not you. A second empty LLC doesn't count. If the landlord won't drop the personal guarantee entirely, two middle grounds are common: a capped personal guarantee (say, 12 months of rent) with the company guaranteeing the rest, or a personal guarantee that converts to company-only after a milestone such as 24 months of on-time rent.
How much you could owe
Lease: 5 years at $6,000 per month plus $1,200 per month in CAM and taxes. The business closes after 18 months, with 42 months left.
| Guarantee | Your worst-case personal exposure |
|---|---|
| Unlimited, full term | ~$302,000 (42 × $7,200), plus legal fees, reduced only by what the landlord recovers re-renting where state law requires it |
| Capped at 12 months' rent | $72,000 at most |
| Burned off after 3 years of on-time payment | ~$302,000 today, but $0 once the burn-off date passes |
| Good guy, 90-day notice | ~$21,600 (3 × $7,200) if you give notice, pay through move-out, and surrender properly |
How much the landlord actually collects depends on your lease's default clause and your state's rules on re-renting. See what happens if you break a commercial lease for a worked example.
A real guarantee clause, and the version to ask for
This is the guaranty from a public, SEC-filed restaurant lease: both owners, husband and wife, personally liable for the whole lease, renewals and assignments included. Our review priced the exposure at about $644,000 and wrote the replacement on the right: a cap of 12 months' rent that ends after 3 clean years.
What the landlord wrote
THE OWNERS, husband and wife, jointly and severally, on behalf of each of their marital, community and sole and separate property estates … This Guaranty shall apply to the Lease, any extension, renewal, modification or amendment thereof, to any assignment, subletting or other tenancy thereunder
What to ask for
(a) Cap. … Guarantor’s aggregate liability under the Guaranty shall not exceed an amount equal to twelve (12) months of the monthly Base Rent and Tenant’s Share of Operating Expenses payable under the Lease at the time of the first uncured Event of Default … (b) Burn-Off. If no monetary Event of Default by Tenant has occurred and remained uncured beyond any applicable notice and cure period during the first [36] months following the Commencement Date, the Guaranty shall automatically terminate …
Source: Exhibit E of a public restaurant lease, and the replacement language from our sample report. See the full report →
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What's normal
These are the benchmarks commercial real estate attorneys describe for small business tenants (sources in our market standards guide):
| Market | Guarantee required from most new or small tenants, including LLCs. Unlimited is the landlord's opening ask. |
| Tenant-friendly | No guarantee; a cap of 6-24 months of rent; a burn-off after 2-3 years; a good guy guarantee; release when you sell the business |
| Red flag | Unlimited, joint and several, covering renewal terms, surviving an assignment, waiving your defenses, or requiring your spouse to sign |
Six ways to limit a personal guarantee
1. Cap the dollar amount
Limit your personal liability to a fixed amount, usually expressed in months of rent. 6-12 months is a strong tenant position; 24 months is common; longer leases may land higher. A declining cap that shrinks each year tracks the landlord's real risk. On a 7-year lease at $15,000 per month, a 24-month cap cuts your maximum exposure from about $1.26 million to $360,000.
What to say: "We're comfortable guaranteeing 12 months of base rent. That gives you a full year to re-lease the space if we default."
2. Add a burn-off
The guarantee shrinks or disappears after a run of on-time payments. Common schedules:
| Schedule | How it works |
|---|---|
| Full sunset | 100% for the first 24-36 months, then it ends |
| 25% a year | Drops by a quarter each year of clean payments; gone after year 4 |
| 50/0 | Drops to 50% after 18 months, to zero after 36 |
Sample language to propose:
"If no monetary Event of Default by Tenant has occurred and remained uncured beyond any applicable notice and cure period during the first [36] months following the Commencement Date, the Guaranty shall automatically terminate and Guarantor shall have no further liability thereunder, and Landlord shall, upon request, confirm such termination in writing."
Watch for a clock reset. Some burn-offs restart from zero after a single late payment. Tie the test to "beyond any applicable cure period," not "when due," and ask that a late payment delay the next step rather than reset the whole schedule. Also ask for a written confirmation when each step is reached.
3. Ask for a good guy guarantee
Your personal liability ends when you:
- Give written notice of your intent to leave (60-90 days is common)
- Pay all rent and charges through the move-out date
- Return the space vacant and in the condition the lease requires, keys included
It's standard in New York City and negotiable elsewhere. On a $8,000-a-month lease with 5 years left, it's the difference between owing up to $480,000 and about $24,000.
The conditions are enforced strictly. Late or improperly delivered notice, unpaid utilities, or furniture left behind can void the release. Calendar the notice deadline, send notice exactly as the lease requires, and photograph the space when you leave.
4. Limit it to the initial term
Ask that the guarantee not cover renewal or extension terms unless you sign again, and that it expire on a fixed date (for example, after 3 years of a 5-year lease) if the landlord won't agree to a burn-off.
5. Offer cash security instead
A larger security deposit, a letter of credit, or a few months of prepaid rent can replace the guarantee, or reduce it. You tie up cash, but your personal exposure has a hard ceiling. Security deposits explained
6. Split liability among owners
If several owners sign, the default is usually joint and several liability: the landlord can pursue any one of you for the full amount, regardless of your ownership share. Ask for several-only liability, so each guarantor owes only their percentage.
Language to look for: "Each Guarantor shall be jointly and severally liable for all obligations."
Ask instead for: "Each Guarantor shall be severally, and not jointly, liable for [its ownership percentage] of the obligations."
Other limits worth asking for: cover base rent only (not CAM, acceleration, or the landlord's legal fees); carve-outs for landlord default, casualty, and condemnation; and release of the guarantor when you sell the business and a qualified buyer takes over the lease. See selling a business with a lease.
Not signing yet? Keep the language for later.
The 10-clause negotiation checklist, including the guarantee cap and burn-off wording. PDF, by email.
When the landlord can call the guarantee
- Unpaid rent past the cure period (market is 3-10 days for rent)
- Abandoning the space without following the lease's exit rules
- Assigning or subletting without required consent
- Other defaults that aren't cured, such as operating outside your permitted use
Bankruptcy doesn't protect the guarantor. The automatic stay in a business bankruptcy protects the business, not you. Landlords can generally keep pursuing a guarantor while the LLC is in bankruptcy. The only real protection is negotiating the guarantee before you sign.
How to negotiate it
- Raise it in the letter of intent, before the lease is drafted. It's much harder to change later. Letters of intent explained
- Lead with the deal you can live with, not a flat no: "We'll sign a guarantee capped at 12 months of rent that ends after three years of on-time payments."
- Make the landlord's case for them. "You're protected during the riskiest early years, and we're motivated to pay perfectly." The risk really is highest at the start.
- Trade, don't just ask. Landlords often accept a cap if you concede on the burn-off timing, or a good guy guarantee if you offer a longer notice period or a slightly larger deposit.
- Get the release in writing: what documentation the landlord gives you when the guarantee ends or burns off.
- Read the guarantee itself, not just the lease summary. It's often a separate exhibit at the back.
If the landlord won't move on any of this, treat it as a preview of how they'll handle repairs and disputes for the next 5-10 years.
Questions to answer before you sign
- What is my maximum dollar exposure if the business fails in year one?
- Does the guarantee cover only rent, or also CAM, taxes, legal fees, and renewal terms?
- Is there a cap, a burn-off, or a good guy exit, and what exactly triggers each?
- If multiple owners sign, is it joint and several or several only?
- Does the guarantee survive if I sell the business and assign the lease?
- Am I waiving defenses if the landlord breaches first?
Related guides
- What happens if you break a commercial lease: what a guarantor actually ends up owing
- Selling a business with a lease: getting the guarantor released
- Commercial lease market standards: what's normal for every major clause
- Letters of intent: where to negotiate the guarantee first
See what your guarantee could cost you
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This article is for informational purposes only and does not constitute legal advice. For advice about your specific lease, consult a licensed commercial real estate attorney in your jurisdiction.