What is a personal guarantee in a lease?

A personal guarantee is a promise by one or more people, usually the owner, to pay a business lease if the company cannot. In a commercial lease (a rental contract for business space, not a home), this means the landlord may try to collect unpaid rent, damage costs, or other amounts from the person who signed the guarantee, not just from the company.

This matters because forming an LLC (limited liability company, a business structure that usually separates the owner's personal assets from business debts) or a corporation does not always protect you from a debt you personally guaranteed. If you sign a personal guarantee, you may be taking on direct personal risk.

This is general educational information, not legal advice. For a lease decision, check the exact document and consider speaking with a licensed attorney through our free matching service.

Not every guarantee is the same. Some are broad and cover almost every amount owed under the lease. Others are narrower.

A personal guarantee may cover:
- Unpaid base rent
- Additional rent, such as common area charges or taxes if the lease includes them
- Costs for property damage beyond normal wear
- Attorney's fees or collection costs if the lease allows them
- The full lease term, even if the business closes early

Some guarantees are limited guarantees, meaning the owner's personal responsibility is capped by time or amount. For example, the guarantee might end after 12 on-time payments, or it might be limited to a set dollar amount. A landlord may also ask for a good guy guarantee, which usually means the owner is personally responsible until the tenant leaves the space properly and returns it according to the lease terms.

Because wording matters, it helps to have a lawyer review the lease and guarantee together. You can also read more about commercial leases and real estate and contracts and agreements.

A generic example: Maria opens a small bakery through an LLC and signs a five-year store lease. The landlord also requires Maria to sign a personal guarantee. Two years later, the bakery loses a major wholesale customer and falls behind on rent.

Even though the lease is in the LLC's name, the landlord may try to collect from Maria personally because she signed the guarantee. Depending on the lease language, that could include unpaid rent, late fees, and other charges the lease says the tenant owes.

This does not mean the landlord automatically wins every dispute. It means the guarantee can give the landlord another path to seek payment. The result depends on the actual contract, state law, and the facts.

If a landlord asks for a personal guarantee, slow down and review the documents carefully.

1. Ask exactly who is guaranteeing the lease and for how long.
2. Check whether the guarantee is unlimited or capped.
3. Look for release terms, such as ending the guarantee after a period of on-time payments.
4. Confirm what happens if you assign the lease or sell the business.
5. Have a licensed attorney review the lease before you sign.

You can learn how attorney costs often work at how much does a business lawyer cost. If you want help finding the right lawyer, FoundryCounsel is not a law firm and does not provide legal advice, but we can offer a free match with a licensed attorney for lease review or negotiation. When you ask for a match, share contact details and a short description of the lease issue only, not sensitive information like Social Security numbers, tax ID numbers, bank account numbers, immigration status, or confidential business secrets.