On Demand
Basic

Good Guy Guaranties: Enforcement and Defense

1h 1m

Created on March 09, 2023

Intermediate

CC

$59

Overview

When it comes to defaults under commercial leases, the good guy guaranty is at least as important as, often more important than, the commercial lease itself. It is essential that anyone practicing in this area know how to effectively prosecute a case against a guarantor or defend a guarantor. This course covers every aspect of prosecuting good guy guaranties and defending guarantors in such lawsuits. 

The tenant in commercial leases is frequently an entity, a corporation or a limited liability company that exists for a single purpose, that of being the tenant in a commercial lease for a business. For most businesses, the two biggest operating costs are salary and then rent. Therefore, for example, if Greta's Tea and Pie Shop, Inc. is a restaurant entity, it will typically form a separate entity owned exclusively by it, for example, GTPS, LLC, to be the tenant in its commercial lease. In this way, Greta's Tea and Pie Shop, Inc. is protected from the massive liability that it might otherwise be subject to if the business fails in that location. The problem for landlord, however, is that the single-purpose entity is typically judgment-proof. 

Second, the court system in New York State moves slowly. That last sentence is not to be taken judgmentally, especially in the wake of the Pandemic. It is what it is. If a commercial landlord contacts the author in January 2023 and asks her how long it will take to evict a defaulting commercial tenant in Manhattan, Brooklyn, or Queens, without knowing any other details of the matter, she will tell the commercial landlord that it will take between six months and a year. But it could certainly take longer. 

Putting the last two paragraphs together then, we have a judgment-proof entity defaulting in a slow-as-molasses court system. Before we go further, one might ask why a landlord does not simply insist that a business's main entity be the tenant in every commercial lease. The answer might be that no small business, least of all a tea and pie shop, would undertake that level of risk. Another answer might be that it is not necessarily better for a landlord to be litigating with a business's main entity, which could turn every such litigation into an existential battle. Thus, the Good Guy Guaranty. The Good Guy Guaranty puts some skin in the game of an individual who is (hopefully) not judgment-proof and who has a controlling interest in tenant, such that the individual has incentive not to drag the litigation out and the ability to force the tenant entity to return the premises to landlord. Therefore, the Good Guy Guaranty is at least as important as the commercial lease it supports.

This Lawline course is offered for the benefit of practitioners representing landlords, tenants, and guarantors.

*The case law referred to in this program is New York-specific, but the principles are nationally applicable. 


Learning Objectives:

  1. Identify whether and when a guarantor was released from liability

  1. Calculate what a guarantor is liable for - must security be applied, does the guarantor owe additional rent or accelerated rent?

  1. Access the practicality of pursuing a guarantor

  1. Identify and draft the predicates to a guarantor lawsuit

  1. Prosecute a guarantor lawsuit

  2. Defend against a guarantor lawsuit

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