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In a commercial lease, security deposits and good guy guarantees are used by landlords to manage short-term and long-term financial risks.
It is safer and more secure for a tenant to have its security deposit in the form of cash than a letter of credit.
In addition to paying the rent through the date of surrender and delivering the space broom clean and vacant in order to terminate the good guy guarantee, tenant advocates need to be mindful that some good guy guarantees also require that the landlord must be reimbursed for its unamortized free rent concessions, tenant improvement allowances, brokerage commissions and its cost of landlord’s work.
It can be beneficial for a tenant to reinforce a landlord’s trust by committing to some of the terms in the good guy guarantee, as it can pay dividends for the tenant in the form of other items the landlord will agree to.
When representing a tenant with more than one principal signing the good guy guarantee (“GGG”), the tenant advocate should put into the GGG and the letter of intent that if one of those principals later withdraws from the corporate tenant, the obligations of the withdrawn member under the guaranty may be terminated unilaterally by that withdrawn party, provided that the remaining guarantors remain as guarantors.