Defining the Good Guy Clause
Defining the industry used personal guarantee known as the “Good Guy Clause”
A good guy guaranty is a common lease guaranty in New York City which has became an important and usually a demanded clause by and for both landlords and tenants in structuring a commercial lease.
A typical good guy guaranty requires a creditworthy affiliate of the tenant (often a principal or investor in the tenant’s business) to guarantee the rent obligations under the lease through the date the tenant surrenders the leased premises to the landlord. Basically if the affiliate or “Good guy” does the following: (1) provides landlord with sufficient notice that tenant will be vacating the leased premises (2) has paid all rent obligations to landlord up and until the surrender date of the premises (3) delivers the premises in “broom-clean” condition and (4) has removed all possessions and rubbish from the premises, the “good guy” is released of all the remaining liability.
By way of background, the good guy guaranty was originally created by landlords to motivate tenants to surrender possession and avoid arduous landlord-tenant litigation. For tenants especially for start-up companies, it’s a limited guarantee which allows companies to lease their first space.
Note that a “good guy” guarantee can sometimes be omitted from a lease by way of a tenant offering a large security deposit to the landlord.
Sample Good Guy Clause -
The undersigned hereby covenants and agrees that if there shall occur any default by Tenant in the payment of fixed rent or additional rent or any other charges set forth in the Lease, or if Tenant shall default in the performance of any of the covenants, terms, conditions and agreements contained in the Lease then the undersigned shall in each and every instance up to and including the Release Date (as defined below) (i) pay such fixed rent, additional rent and any other charges due and payable by Tenant to Landlord (ii) faithfully perform and fulfill all of such covenants, terms, conditions and agreements to be performed by Tenant as set forth in the Lease, and (iii) pay to Landlord all consequential damages that may be incurred by Landlord as the result of any default by Tenant under the Lease including without limitation all attorneys’ fees and disbursements incurred by Landlord as a result of any such default and/or the enforcement of any of the provisions of the Good Guy Clause. The “Release Date” shall mean the upon which Tenant returns to the Landlord the keys to the Premises and surrenders possession of the Premises in the condition required by the Lease as of the expiration or termination thereof free of all tenancies or rights or claims of occupancy by Tenant or any party claiming through Tenant.
*Please, always consult your legal counsel before making any decision.
*Written by – Fountain Realty
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