• September 13, 2020

Key Takeaways: What is a Good Guy Guarantee?

Key Takeaways: What is a Good Guy Guarantee?

At its most basic level, a Good Guy Guaranty (GGG) is a document wherein a tenant’s principal or principals personally guarantee that all rent will be paid while the corporate tenant it owns and controls occupies its landlord’s space. The guarantor principal(s) can unilaterally terminate this basic GGG by (i) paying landlord all rent due and owing through the date of surrender of the space; and (ii) delivering the space to landlord broom clean & vacant along with the keys to the space. The reality though is that in this day and age and in the vast majority of commercial leases, there is no such thing anymore as a “standard” or “basic” GGG.

Landlord Advocates:Not only does a landlord want a tenant’s principals to be motivated to give back their space if they have gone from being a good boy or girl into a bad one rent paying wise, but landlords also want to cover as much of their short-term risks costs as possible (such as the aforementioned $1,200,000 in the prior example).

Tenant Advocates: When the principals of a tenant hesitate to give the landlord a basic GGG (like the one described above), it sends up a red flag often perceived as foreshadowing a breach of the most basic of covenants a tenant makes to a landlord; to pay rent.

A common misconception among tenants is that they think that if they give back the space early that not only the guarantor is let off the hook, but the tenant is let off the hook as well. That could not be further from the truth! If the tenant gives back the space early and releases the guarantor, it’s not the termination of the lease, it’s just the termination of the GGG.

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