Personal guaranty

[Xiuyuan W.]

Hi, I am a commercial real estate landlord wanting to inquire something about personal guaranty. 

I always have some worry that tenants go bankrupt before expiration of the lease term since most of the commercial leases were signed/commited by a LLC rather than actual person. Therefore I've asked my tenants to personal guaranty the lease, but I presume the tenants could still transfer their assets to other relatives when they intend to back out of the lease. So my question is how can I make sure the personal guaranty will be enforceable?

Also, anyone knows what is the difference between a personal guaranty lease and a principal co-signed lease?

Any input would be highly appreciated.

[Andrew Bauer]

@Xiuyuan W.

I'm not a bankruptcy attorney and I am not licensed in California. However, generally speaking, transferring assets out your name prior to filing for bankruptcy in order to dodge creditors is a big no-no and can get you in all kinds of trouble (including jail time). If a guarantor transfers assets out of the guarantor's name in order to avoid liability under a personal guarantee, this is fraud, and a good attorney may be able to claw back those fraudulent transfers.

It would be best to talk to your attorney about how to mitigate your risk in these situations. Generally, it's common to require both the lessee and guarantor(s) to provide quarterly or annual financial statements and to maintain whatever minimum level of capitalization gives you comfort. 

Generally, the liability of a guarantor is triggered only on the default of the lessee, where as co-signers are equally liable for all lease obligations. The specific rights and responsibilities of a guarantor or co-signor will be governed by the lease and guarantor agreements and local law.