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Commercial Office Space Leases: The Issue Of Personal Guarantees

Commercial Space Toronto Blog

Commercial Office Space Leases: The Issue Of Personal Guarantees

12401964615_ddc14cff65 Toronto has no dearth of commercial spaces available on lease. So, why are all the restrictions imposed by the land owners? Think about the days when the commercial real estate business fell flat on its face. Landowners were unable to get their dues cleared from their tenants who in turn were rendered financially incapable of clearing the lease amount. This resulted in the need for better and more solid repayment terms. Enter… Personal guarantee! What does personal guarantee mean? If the tenant or the business owner is relatively new in the field and the landowner doubts that the tenant will be able to make timely payments to him, they might ask for a guarantee in terms of either personal or corporate goods. Here, our focus will be on the personal guarantee which means that a personal guarantor or individual will pay the rent and any remaining dues if the tenant fails to do so. In the case of personal guarantees in commercial office space leases in Toronto, the guarantee will be provided by a guarantor who will agree to the terms of lease payment after a serious discussion with the tenant, the landlord and the agency that plays the role of a real estate broker. The landlord may also ask for a full check on the financials of the personal guarantor before approving his role. How is the payment of the lease guaranteed? Usually the guarantee is made on the basis of collaterals such as the personal assets of the guarantor. Following the guarantee, the landowner is assured that even if the tenant fails to pay the lease or other related expenses such as the repair or the maintenance taxes, the personal guarantor will do the same on his behalf. How to negotiate the terms Even if the landlord asks for a personal guarantee in order to lease a commercial space, there is always ‘space’ for you to negotiate! How? Well, first of all you can start by fixing a time limit on the guarantee. For instance if the property is to be leased for 3 years, you can ask for the personal guarantee to cover the first 1 and a half year. Another way is to set a time limit for the guaranteed lease payment and payment failure will lead to the landlord searching for ways in which to lease the space again. Another way is to use a line of credit to pay off the guaranteed amount. The role of a lawyer/broker If you like what you have just read about negotiating the terms of personal guarantees in commercial space leases in Toronto, then you will definitely love when you come to know that the entire prospect isn’t as gloomy as it seems. There are ways in which you can reach a favorable agreement wherein all the parties will be satisfied. Furthermore, the best way to do this is by considering the services of an intelligent real estate broker or a lawyer who specializes in making commercial real estate leasing agreements. There are enough commercial spaces available in Toronto. All you need to crack a great deal is to get a good broker or lawyer to assist you. Once you’ve taken care of this part, negotiating the terms of the personal guarantee will not be difficult at all!

Posted 2017-09-15T20:47:18+00:00 Sep 15 2017 By inBlogwith0 Comments