What This Liability Means

A personal guaranty makes you personally responsible for the entire lease obligation — every month of rent, every CAM charge, every restoration cost — regardless of whether your business is still operating. If your LLC fails, the landlord skips the business and comes directly after your personal assets.

Dollar Example: 5-year lease at $4,000/month, unlimited personal guaranty

Real Dollar Example

Scenario5-year lease at $4,000/month, unlimited personal guaranty
Exposure$240,000 personal liability

If your business closes in year 2 with 3 years remaining, your personal exposure is $144,000 in remaining rent alone — before restoration costs, legal fees, and any CAM charges.

Worst Case Scenario

Business closes in year 1 of a 10-year lease at $5,000/month: $600,000 remaining rent + $50,000 restoration + $30,000 landlord legal fees = $680,000 personal liability. The landlord can garnish wages, place liens on real property, and pursue bank accounts.

Warning Signs in Your Lease

  • 'Guarantor agrees to be personally liable for all obligations of Tenant' — unlimited, no cap
  • 'Joint and several liability' — landlord can pursue guarantor without pursuing tenant first

How to Limit This Liability

  • Cap guaranty at 12-18 months rent with a burn-down provision reducing exposure each year of good standing
  • Negotiate a 'good guy' clause allowing lease termination with guaranty expiration upon 60-90 days notice

Frequently Asked Questions

What is the difference between a limited and unlimited personal guaranty?
An unlimited guaranty makes you personally liable for every dollar owed under the lease with no ceiling. A limited (capped) guaranty caps your exposure at a fixed amount — typically 12-24 months rent.
Can I negotiate a personal guaranty?
Yes. The most tenant-favorable outcome is a burn-down guaranty that reduces your personal exposure by 20% each year the lease is in good standing. After 5 years, your exposure is zero.
What assets can a landlord reach through a personal guaranty?
Savings accounts, investment accounts, real property equity, future wages, and any other non-exempt personal assets. State homestead exemptions may protect your primary residence in some states.
Does an LLC protect me from a personal guaranty?
No. A personal guaranty is signed by you individually, outside the LLC. The LLC provides no protection for obligations you personally guaranteed.
When does a landlord typically call a personal guaranty?
When the tenant entity defaults on rent or other lease obligations and doesn't cure within the notice period. The landlord issues notice to the guarantor and demands performance of all obligations.