If you’re signing a lease that involves a personal guaranty, it’s important to understand your risks. Landlord-guarantor agreements often come into play when a business signs a lease and the landlord asks for a personal promise to cover the rent. These agreements create serious financial obligations, so it’s smart to know what protections the law provides.
At Brown Borkowski & Morrow, our lawyers review contracts, explain potential risks and provide strategies to limit personal liability. Contact us today at 888-757-1681 or reach out through our online form for guidance before signing the lease.
Understanding the guarantor’s role
In Michigan, a guarantor agrees to pay rent or other lease obligations if the tenant defaults. This commitment often applies to commercial leases, especially when the business has little or no credit history. The landlord uses the guaranty to reduce their financial risk. But even though you’re helping the business secure space, you’re also putting your own finances on the line.
Limiting personal exposure
One protection you can negotiate is a limited guaranty. This might cap your financial responsibility to a specific amount or timeframe. For example, the guaranty could cover just the first year of rent or limit liability to a certain dollar amount. Another strategy is a “good guy” clause, which allows you to walk away from the guaranty if the tenant vacates and pays rent up to that point. These tools give you more control and help prevent long-term risk.
Enforcing guaranty agreements in court
Courts in Michigan typically enforce signed guaranty agreements. However, they also require clear terms. If the language is vague or overly broad, a court might not uphold it. Some courts have ruled against landlords when the guaranty didn’t include specific limits or spelled out when the guaranty ended. That means clarity in writing offers real protection.
You should also check whether the guaranty renews automatically or covers lease extensions. Sometimes, a landlord may try to include language that continues your responsibility even if the original lease changes. Reviewing the fine print helps avoid future surprises.
Let us protect you
At Brown Borkowski & Morrow, we offer Michigan clients experienced legal support to help ensure leases and guaranties are fair, enforceable and aligned with your business goals. Call us at 888-757-1681 or use the online contact form to schedule a free case evaluation.