'Good guy' lease provision can benefit practice

August 25, 2012

Has your landlord offered you a 'good guy' clause in your lease? See how such provisions can protect you in the future.

Q: My landlord offered my practice a lease renewal that included a "good guy guarantee." He said this provision would be to my advantage, but I am skeptical. It sounds like this type of provision protects the landlord, not the tenant. Any thoughts?

A: Under a good guy guarantee, if your business can no longer sustain its lease obligations, and you (1) vacate the space promptly, (2) leave the space clean, and (3) give the landlord the keys, then only the business that signed the lease will remain liable for the lease obligations. Your personal liability under the guarantee will end when you vacate the space.

A "true" good guy guarantee benefits you, the tenant, because it creates a substantially reduced liability as compared to the more traditional personal guarantee, whereby your personal assets may be at risk to satisfy obligations if your practice were to default on the lease.

Beyond this, when negotiating terms of your lease, consider ways to avoid a guarantee entirely. Emphasize your practice's financial condition and consider negotiating a larger security deposit-possibly one that diminishes over time-as an alternative.

Manley is president of Healthcare Real Estate Advisors in New York, New York.