Commercial leasing

Personal guarantees and guarantor release in a lease.

A landlord will usually ask the people behind a company tenant to guarantee the lease, and that exposure can outlast the business. CMK Legal in Richmond advises tenants, guarantors and landlords across Victoria on capping a guarantee, releasing a guarantor on assignment, and whether a guarantee survives a sale.

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Solicitor-reviewed

Guarantees reviewed by a Victorian commercial lawyer.

Fast turnaround

Advice back within 2 to 3 business days in most cases.

Fixed fee, quoted first

Fixed fee, quoted before we start.

Victorian leasing law

Grounded in Victorian leasing law and VCAT practice.

How lease guarantees work.

Where the tenant is a small company, a landlord commonly requires a personal guarantee from the directors or owners, so that if the company defaults the individuals are liable.

The negotiation is rarely whether to give a guarantee, but how much and for how long. A cap on the amount, a release on assignment, or a bank guarantee instead are all reasonable things to ask for.

A guarantee can also survive events the guarantor did not expect. It has been held that a guarantee can be enforceable by a purchaser of the freehold, so a change of landlord does not necessarily release the guarantor.

A guarantee signed without a cap or a release point can expose an individual well beyond the life of the business. The time to deal with that is before signing, or at the point of assignment.

Why the guarantee needs attention.

The exposure is capped

An uncapped guarantee can follow an individual well beyond the term. A cap on the amount and the duration keeps the risk in proportion to the deal.

Release on assignment is negotiated

When the business and the lease are sold, the outgoing guarantor should be released. That release has to be dealt with in the assignment rather than assumed to happen.

A bank guarantee is weighed as an alternative

A defined bank guarantee can be offered in place of an open-ended personal guarantee. Which the landlord will accept is a matter for negotiation, but it is worth raising.

Survival on a sale is understood

A guarantee can remain enforceable by a buyer of the freehold, so a change of landlord does not automatically release the guarantor. Knowing that shapes how the guarantee is drafted.

Talk to us if.

  • A landlord is asking a director to guarantee the lease
  • You want a cap or a time limit on a personal guarantee
  • You are selling the business and want the guarantor released
  • You would prefer to give a bank guarantee instead
  • You are a guarantor being pursued after the business has gone
  • The lease is being assigned and the guarantee needs dealing with
  • You are a landlord and want the guarantee drafted to hold
  • The property has been sold and a guarantee is being enforced

A guarantee is easiest to shape before signing and at the point of assignment. If you are already being pursued, we can tell you where you stand.

How we help with a guarantee.

  1. 01

    Send us the documents

    The lease, the guarantee, and any assignment or sale documents in play.

  2. 02

    Scope and fixed fee

    We scope the work and quote before starting.

  3. 03

    Review the guarantee

    The scope, cap, duration and release terms are read against the lease.

  4. 04

    Talk it through

    We explain the exposure and the points worth negotiating or resisting, by phone.

  5. 05

    Act if instructed

    If you want us to, we negotiate the cap or release, or respond to a claim on the guarantee.

Fixed fees for guarantee advice.

Advice on a personal guarantee or a guarantor release is quoted as a fixed fee once we have seen the documents, with a call included. Defending a claim on a guarantee is quoted separately before any cost moves.

Request a fixed-fee quote

FAQs

Guarantee and guarantor release FAQs.

Still unsure? Call us on (03) 9008 7224 and speak to a lawyer, not a call centre.

Do I have to give a personal guarantee?
Where the tenant is a small company, a landlord usually asks for one. The negotiation is rarely whether, but how much and for how long. A cap, a release on assignment, or a bank guarantee instead are all reasonable requests.
Can I cap my exposure under a guarantee?
Often, yes. A cap on the amount and a limit on the duration keep the risk in proportion. Whether the landlord agrees is a matter for negotiation, but it is a standard point to raise.
Am I released from the guarantee when I sell the business?
Not automatically. Release of the outgoing guarantor has to be dealt with in the assignment. If it is overlooked, the guarantee can continue even after the business has been handed over.
Does my guarantee survive if the landlord sells?
It can. A guarantee has been held to be enforceable by a purchaser of the freehold, so a change of landlord does not necessarily release the guarantor. How the guarantee is drafted affects this.
Can I offer a bank guarantee instead?
You can offer one. A bank guarantee has a defined amount and duration, where a personal guarantee can be open-ended. Whether the landlord accepts it is part of the negotiation.

Related services.

Security deposits & bank guarantees

Bonds, bank guarantees and personal guarantees, and getting the security back.

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Lease assignment & transfer

Transferring a lease when a business is bought or sold, with consent handled properly.

Learn more

Lease negotiation

We negotiate rent, incentives, options and repair clauses with the other side.

Learn more

Surrender & early exit

Ending a lease early without being left liable for the rest of the term.

Learn more

Keep a guarantee in proportion.

Start online or book a consultation with a CMK Legal commercial leasing solicitor in Richmond, Melbourne.

Start onlineBook a consultation