So I'm trying to sell my retail business but the lease has 2 years left and the landlord won't budge on assigning it to the buyer. If I just walk away and break the lease, what happens to my personal guarantee? Am I on the hook for the full remaining rent? I signed it personally back when I was younger and dumber. Any thoughts?
Lease Guarantee
What happens to your personal guarantee if you break your lease?
Yes, you're on the hook. Personal guarantee means exactly that — you personally guarantee the lease. Breaking it just triggers the guarantee. The landlord can sue you for the remaining rent, and they will.
Short answer: the guarantee doesn't disappear when you break the lease. It gets activated. Longer answer: depends on the language in your guarantee. Some have caps, some expire after a certain period, some are full-term. Read it carefully or have a lawyer Read it.
I went through this in 2019. Broke a lease with 18 months left, personal guarantee. Landlord sued, we settled for about 60% of remaining rent plus his legal fees. Not fun but not the end of the world.
What MangoChutney99 said. Also, have you considered negotiating a lease buyout with the landlord? Sometimes they'd rather take a lump sum now than chase you for years.
SprocketRocket makes a good point. A buyout might be cheaper than a lawsuit. But don't expect the landlord to be reasonable if he thinks he has you by the guarantee.
Is the guarantee even enforceable if you didn't have independent counsel when you signed? Just spitballing. I'm not a lawyer
cc_burner_88 — probably yes, unless there was fraud or extreme duress. Courts generally uphold personal guarantees. Lack of independent counsel alone won't void it in most states.
Also check if the guarantee is a 'good guy guarantee' or a full guarantee. Good guy guarantees typically only require you to stay current until the property is re-let, then you're off the hook. Full guarantee sticks with you for the whole term.
Mine just says 'guarantor unconditionally guarantees all obligations of tenant.' No mention of re-letting. So I'm guessing that's the bad kind.
Yeah, that's the bad kind. Landlord can come after you for the full remaining rent and doesn't even have to try to re-let. Though in practice they have a duty to mitigate in most states, so they can't just sit back and collect.
Duty to mitigate varies wildly by state. In some places, commercial landlords have no duty to mitigate at all. OP, what state are you in?
Colorado. And And the lease says 'landlord shall have no obligation to mitigate damages.' Does that even hold up?
Colorado does recognize a duty to mitigate in some contexts, but commercial leases can waive it. You need a local lawyer, not forum advice. Seriously.
This thread is a good reminder to never sign a personal guarantee without reading every single word. We've all done dumb things. Hope it works out, OP.