What follows is my own general perspective on commercial leasing in California, based on the agreements I review for business tenants. It is not legal advice, it is not a definitive statement of California law, and every lease and every negotiation depends on its own facts and leverage.
If you are signing a commercial lease as a small business or a newly formed entity, the landlord will almost certainly ask you to personally guarantee it. In my experience this is the single most consequential term in the document, and it is the one tenants most often skim past because it sits near the back and reads like boilerplate.
A personal guarantee means the protection you set up by forming an LLC or corporation does not apply to this obligation. If the business fails and the space sits empty, the landlord can pursue you individually — your savings, your home equity, your personal credit — for rent that would otherwise have died with the entity.
Why landlords ask for one
It is not unreasonable from their side. A landlord signing a five or ten year lease with a two-month-old LLC that has no operating history and no assets is taking real risk. The guarantee is how they price that risk down. My point is not that you should refuse outright — in many deals that is not realistic — but that a guarantee is a negotiable term with many gradations, and most tenants treat it as binary.
What I try to negotiate instead of a full guarantee
These are the structures I raise most often. Which are achievable depends entirely on your leverage: the strength of the market, how long the space has been vacant, and how much the landlord wants you specifically.
- A “good guy” guarantee. My preferred outcome in most deals. You remain personally liable only until you vacate, surrender the space in the required condition, and are current on rent through that date. It protects the landlord from a tenant who stops paying and squats, while capping your exposure at a known number rather than the remaining term.
- A capped guarantee. Liability limited to a fixed dollar amount or a set number of months of rent — six or twelve months is a common landing spot. A cap turns an open-ended risk into one you can actually plan around.
- A burn-off or sunset provision. The guarantee reduces over time or terminates entirely after a period of on-time payment, often two or three years. The argument is straightforward: the landlord wanted protection against an unproven tenant, and after three years of paying on time you are no longer unproven.
- A larger security deposit instead. Sometimes a landlord will trade the guarantee for additional cash security or a letter of credit. Whether that is a better deal depends on your cost of capital, but it converts unlimited personal risk into a defined, recoverable amount.
- Narrowing who signs. If there are multiple owners, watch for joint and several liability. That language can leave one partner exposed for the entire obligation if the others cannot pay.
The language I read most carefully
Two provisions deserve particular attention, and both tend to appear in the guarantee itself rather than the body of the lease.
The first is whether the guarantee survives an assignment or sublease. I have seen tenants sell a business, assign the lease with the landlord’s consent, and remain personally on the hook for a successor they no longer control. If you are guaranteeing the lease, my view is that the guarantee should end when your involvement does.
The second is whether the guarantee automatically extends to renewals, expansions, or amendments. Language that binds you to “any and all extensions, modifications and amendments” can mean you are guaranteeing terms that have not been written yet.
Where I see tenants get hurt
The pattern is almost always the same. A tenant negotiates hard on base rent and free rent, wins something real there, and treats everything after the rent schedule as standard. Then the business does not work out, they hand back the keys expecting the entity to absorb it, and discover they are personally liable for four remaining years.
The comparison worth making is not between a lease review and nothing. It is between a lease review and the exposure in the guarantee. On a five-year lease at eight thousand a month, an uncapped guarantee is roughly a half-million dollar personal risk. Having someone read the document first is not an expensive decision by comparison.
Practical suggestions
Ask for the guarantee language early, with the letter of intent rather than after. Terms are far more movable at the LOI stage, and a landlord who has already conceded on rent is less inclined to reopen anything later. Get every negotiated change into the signed document — I would not rely on an email or a conversation about how a clause “will not really be enforced that way.”
And read the guarantee as a standalone document. It is frequently a separate exhibit with its own signature line, which is exactly why it gets signed without the same scrutiny as the lease.
If you have a lease or an LOI in front of you and want the guarantee looked at before you sign, call (310) 556-9692. Lease review is generally handled on an hourly or flat-fee basis, and I will give you a sense of scope before starting.
Related reading: Commercial lease review and negotiation · Business contracts · Why business owners need a lease review before signing
Again, these are my own observations and opinions rather than legal advice, and reading this does not create an attorney-client relationship. If you want a specific lease looked at, call me.
TALK TO A LOS ANGELES ATTORNEY
Tell us what is happening and we will get back to you. Your consultation is free, and we will tell you honestly whether we think you have a case worth pursuing.
