In a business lease, a personal guarantee clause makes the business owner personally liable for the rent if the firm fails to pay. Your landlord could sue you for any unpaid rent from your business lease if the firm struggles to make money or fails. A business lease is what this is referred to as.
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Given the fact that 90% of companies fail, it’s understandable why many landlords need a personal guarantee in commercial contracts. However, as a business owner, these leases provide little financial security. The best you can hope for is to get the best personal guarantee feasible for the commercial lease.
Negotiating a Better Lease for a Personal Guarantee Company
Personal guarantees on commercial leases would not exist in an ideal society. However, this is far from an ideal environment, and the best you can hope for is to negotiate the most favourable lease conditions possible. Here are a few pointers on how to negotiate personal guarantees.
Know What Is and Isn’t Covered
Commercial leases, like residential leases, encompass much more than just the space you’ll be renting. A typical company lease will specify who is responsible for repairs, utility payments, and insurance coverage.
Read the lease thoroughly to familiarise yourself with these minor nuances. You’ll be able to better negotiate the lease this way.
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Obtain Professional Assistance
Certain parts of business expert assistance are not included, such as business registration, company administration, and legal issues. Working with a professional is also beneficial when negotiating a large-scale agreement such as a company lease.
The landlord is almost certainly working with an attorney or a broker to ensure that they get the most out of the contract. You’ll be at a disadvantage if you try to negotiate on your own. Find a lawyer to assist you in obtaining the best possible terms.
Consider the long term
Choose a multi-year lease if you’ve found a space you like and envision yourself utilising for a long time. The longer you wait to use the space, the more negotiation power you’ll have over your personal guarantee. When a landlord realises a renter is willing to pay rent for more than a year, most landlords are willing to make compromises.
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Consider the deadlines
Tenants make the mistake of waiting until the last minute to negotiate lease terms. It’s unlikely that your landlord will listen to you if you approach them a week before your existing lease expires and ask them to make concessions on your personal guarantee.
Months before your current lease expires, consider what you want and renegotiate with your landlord. You’ll have ample time to come to an agreement this way. If your landlord refuses to negotiate, you have plenty of time to find a new home.
