A failing business is a headache for all parties involved. A tenant is facing financial collapse and failing to pay rent, and the landlord has a tenant consuming space and resources when they would much rather restore a source of income. Without a binding and documented progression following unfortunate circumstances, the legal processes to come can delay movement on replacing the tenant for up to a year. If a tenant has declared bankruptcy, the duration and cost of the legal battles to follow will be even greater. For this reason, establishing Good Guy for your business is crucial.
To avoid months of tiresome ceremony in removing a delinquent tenant, landlords will provision a Good Guy Guarantee in the lease agreement which empowers them to give three month’s notice, after which they may vacate the office space and be relieved of all future lease payments. Of course, the tenant is expected to be a “good guy” (or gal) in that they will fulfill all due payments up until the point of evacuation as well as leaving the office space in the same condition it was when they moved in. Additionally, the tenant's principal is held personally accountable to these prerequisites.
The Good Guy Guarantee is designed to protect both landlords and tenants, and not all guarantees are written equally. Some require a buffer period to elapse—potentially multiple years—before the clause is eligible for invocation. Other variants observe longer notification periods; although the standard is three months, a landlord may present a prewritten clause mandating additional time. Generally, a tenant will lose the security deposit upon invoking Good Guy as well. It is important for tenants to be fully aware of the prerequisites and responsibilities associated with a Good Guy Guarantee prior to signing an agreement.
Additionally, it is crucial to anticipate a variety of outcomes which may complicate a Good Guy Guarantee appearing to be fair for all parties. If a tenant sublets space to a subtenant, the tenant is responsible for all lease payments until the subtenant vacates the space. Alternatively, if a company is purchased or possesses partners in signing the lease who then back out, these changes are not reflected in the guarantee—responsibility remains with the original tenants unless stated otherwise. If all foreseeable edge cases are not addressed, the Good Guy Guarantee can easily lose the benefits which it confers to a tenant.
Your licensed broker should be considering a vast collection of important cases pertaining to your specific lease agreement. Have you discussed Good Guy with your broker?