Thursday, August 2, 2012

Tenant Lease Guarantees

The LinkedIn question was... Is it normal to have to put a personal guarantee on a business space lease when your company is already an LLC? My answer to that question was... There is no normal! It is all a matter of negotiation. If the LLC financials are soft, then the lessor may look for a personal guarantee of a collectible entity or individual, or... perhaps, just require a higher security deposit of several months' security deposit. (I have even seen deals where ALL of the rent is paid in advance an extreme situation to be sure). In weak marketplaces I have seen marginal tenants get into a space with no deposit. Not a good idea, but maybe better than an empty space/building. (Ergo, the old saying...Take a chance, Columbus did!) Like all else in real estate or any other business, you weigh the variables and make a decision. Here's a new twist, given where the U.S. dollar is headed, start negotiating your rents in ounces of gold per square foot (the gold bubble burst is still probably 8 or 9 years off). Think about that one!

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