Small business owners often don’t have the same leverage as larger enterprises when trying to negotiate a commercial lease agreement, but it doesn’t mean they are powerless.
If you’re an entrepreneur looking to lease a commercial space, you know just what’s at stake in terms of your business and personal financial future – and how important it is to protect your assets while mitigating risk. A roadblock you’re likely to encounter when signing your agreement, however, is the personal guarantee. Landlords often request a personal guarantee as part of the commercial lease agreement, but it doesn’t mean you have to walk away from the deal. With preparation, strategic negotiation and an experienced attorney at your side, you can minimize your risk and strike a fair deal. Here are some tips to keep in mind as you navigate a personal guarantee.
Understand What You’re Signing
At its core, a personal guarantee is a way for landlords to mitigate their risk. If your business defaults on the lease, they can come after your personal assets to recover what’s owed. Before approaching the negotiation, take the time to fully understand the terms of the personal guarantee as outlined in the commercial lease agreement, as this will inform your negotiation strategy.
Home in on Areas to Negotiate
Everything is negotiable in a commercial lease agreement, including the personal guarantee. If you can’t avoid one altogether, you have options like proposing a limited personal guarantee or a rolling guarantee, rather than an unlimited personal guarantee, which makes you liable for the entire length of the lease term.
Consider Alternative Forms of Security
Landlords want assurance that you’ll pay your rent on time, but even with a demonstrated financial history, you will likely still need to offer some form of guarantee. You might consider offering a larger upfront deposit, a letter of credit from your bank or prepaying rent for several months. Alternatively, your landlords may be open to accepting a corporate guarantee rather than a personal guarantee.
Partner with an Experienced Attorney
Negotiating a personal guarantee is not the time to DIY. A skilled real estate attorney can help you identify unfair terms or red flags, propose alternative solutions that benefit both you and the landlord, and take the lead on negotiating more favorable terms. Having an advocate on your side can make all the difference in protecting your personal and business financial interests.
Contact Us at Sirulnik Law and ADS Title Services, Inc.
Negotiating commercial lease agreements requires a strong understanding of corporate and real estate law. You also need an advocate who will fight on your behalf. Our experienced attorneys at the Law Offices of Alex D. Sirulnik, P.A. will do just that. Contact us today for help reviewing and negotiating a strong and favorable commercial lease agreement for your Florida business.
