QUESTION

What is a reasonable time for a personal guarantee in stay in the lease for a 10 yrs lease?

Asked on Apr 28th, 2011 on Business Law - Virginia
More details to this question:
I am a business owner, transferring the business to another owner. On the lease assignment, the landlord required me to be the personal guarantee for the new owner for 5 yrs in a 10 yrs lease. However, we have initially verbally agreed to be the personal guarantee in the lease for 2.5 yrs.
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1 ANSWER

Business Start-Ups Attorney serving Glen Allen, VA at Perkins Law, PLLC
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It depends on your perspective and the underlying facts and circumstances of the business relationship (including which side has more bargaining leverage).  A landlord will typically expect the guaranty to stay in place for the full term of the lease (and possibly beyond the term to the extent of any liabilities that arise post-termination) because it wants to be protected for the full duration of the contract to maximize its opportunity to enjoy the full benefit of its bargain.  Be wary of personally guaranteeing obligations of another party (such as the party to whom you are selling your business) since you have no control over that risk.  You'd want to avoid the personal guaranty at all in this context, but if its unavoidable, then negotiate as best you can to minimize the term of the guaranty and limit the scope of the guaranty (dollar amount, nature of liabilities), ask your buyer contractually agree to indemnify, defend, and hold you harmless from any liability or expense you incur under such guaranty, and ask for fairly broad inspection rights/rights to information or notification of any problems so that you can reduce the risk of being totally blindsided by a claim or suit seeking to enforce the guaranty. 
Answered on Mar 01st, 2012 at 10:32 AM

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