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What Are the Risks of Being a Guarantor on a Commercial Lease?

There are a number of risks involved in being the guarantor on a commercial property lease, primarily the legal responsibility to continue payments for the full duration of the contractual agreement, whatever the circumstances.

We are often asked for legal advice before signing as a guarantor to a commercial lease. This is not surprising as company directors, business associates or family members may agree to guarantee a commercial lease, and where the business is forced to close before the agreement has run its course, the guarantor may then have to continue making rent payments, as well as fulfil any other obligations for the remainder of the lease period, sometimes for a number of years into the future. This can have a dramatic effect on the finances of the guarantor, especially when the original tenant has ceased trading and can contribute nothing towards the lease payments.

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  • What Can a Guarantor Be Liable for Under a Commercial Lease?
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We are often asked; what am I liable for under a commercial lease guarantee agreement? The question of what exactly a guarantor is liable for under the terms of a commercial lease will depend on the drafting and specific wording of the guarantee, and whether or not its terms are enforceable. There may be a limit on the guarantee, or else a break clause in the commercial lease enabling the tenant to terminate the agreement early. Even if the guarantee if strictly enforceable, there will then be the question of whether a tenant can sub-let the lease, or otherwise assign the lease to a new tenant. Either way, the landlord's consent will be required, and in most cases the end result will be the transfer of the guarantee to the sub-tenant or new leaseholder. This is however a complicated area of law, and again, much depends on what was stated in the original lease document.
Given the complexity of many commercial leases, and much of the law surrounding them, guarantors should seek legal advice if a landlord attempts to enforce a guarantee when a commercial tenant has defaulted on their obligations. If you are wondering; how can a guarantor to a commercial lease avoid paying then our specialist solicitor will examine the lease document, and will be able to advise as to whether a guarantee is in fact enforceable, and if not, the grounds under which it can be opposed. If there is no escape from the terms of the guarantee, a lawyer can advise on the best action to take in terms of reducing or offsetting the guarantor's financial liability. This may involve negotiating with the landlord to reach agreement over terminating the lease, or advising on the sub-letting or assignation of the lease to a third party occupier.

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Our firm has years of experience in commercial property matters across England and Wales.

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Send Our Commercial Property Law Team an Enquiry:

Commercial Property Team:

Commercial Property Solicitor
James Edwards is a commercial property solicitor advising landlords and tenants on commercial leases. He also has experience in buying and selling businesses. Contact James for a free no obligation quotation today by phone or via our contact form.
Commercial Property Solicitor
Sophie McGregor is a commercial property solicitor working with James. She assists clients with all aspects of leases. Sophie has detailed knowledge of most types of commercial property transactions.

About Our Commercial Property Team >>

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