on a commercial lease the landlord is offering me a rolling personal guaranty

In Leasing Property - Asked by Steve C. - Apr 19, 2011
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billie m.
Property/Asset Manager
Fort Smith, AR

Not sure what the rolling stands for unless it means that your personal guaranty drops off after you prove yourself credit worthy.

Apr 19, 2011
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Andy R.
Broker/Agent
Denver, CO

I've heard it used, but have never seen it in any real estate dictionaries or texts. Most likely, he's saying that at any point in the lease, you are guaranteeing the next 'X' number of lease payments. This gives the landlord some certainty to his rent roll without you having to guaranty a foreboding dollar amount. It's a good compromise, as his guaranty also keeps up with rent increases and in addition to limiting your exposure, it declines rapidly as you approach lease termination.
Another option is a declining guaranty, which is a set amount, say for the landlord's expenses to get you in the space plus a few months of rent, but in this case it declines with every lease payment you make.

Apr 19, 2011
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Rob B.
Chandler, AZ

Steve…..
Landlords often require personal guarantees to a lease. Don’t be fooled by terms that may not be widely used. Because the landlord has a requirement for a personal guarantee it does not mean that you cannot negotiate some variation of that guarantee. Some of the common variations are:
1. Perhaps the “rolling guarantee” which likely means that the landlord will offer you a personal guarantee that will be set for a certain portion of the lease term. The conditions to eliminating the guarantee may be varied. However, this will be based on your showing that you are a credit worthy tenant that can be trusted to keep the terms of your lease, as that is the major need of a property owner. The landlord will want to know that you have and will continue to have a viable method of paying the rent from the business that is leasing the space. Until such time the landlord will want to be able to attach assets that you may personally hold. Be sharp, be honest, have good credit, have an proven source of business income and be in a business that will not be greatly affected by economic turns. If so, you can likely negotiate a way to “roll out of your personal guarantee”.
2. If you have good business resources you could also ask that a letter of credit be issued by your financial institution for a set period and a fixed dollar amount. This letter of credit would only be called upon if you abrogated the responsibilities of your lease. This may cost 1% or so per year to maintain, but it could be better than a personal guarantee. You would want the business to qualify for the letter of credit, otherwise it would not be any better than the personal guarantee and would have the extra annual cost connected to it.
3. You may satisfy a landlord by putting up a large front end deposit equivalent to several months rent, rather than the personal guarantee. If the landlord is able to utilize this deposit, rather than holding it in a trust account, it may be an incentive to him to take that instead of the personal guarantee. This is saying to the landlord, “if my business defaults on the lease, you have “x” number of months to release the space, and if the space is good for business you surely can get it released during that time.”
There are other creative ways to avoid or “roll out of” a personal guarantee. Be sure that you seek good legal and commercial broker transaction advice. Good professional representation will always cost less and save more. Remember the person who represents himself may indeed have a fool for a client”.
Onward and upward Steve….. Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Apr 19, 2011
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Daron T.
Broker/Agent
Boca Raton, FL

Andy is right on with his comments. If you sign a 6 month rolling that means that if you vacate before the lease expires, you will be responible for 6 months of rent unless there is less than 6 months remaining on the lease. In that case you are responsible for the remaining term.
Landlords will do this with properties that are in demand because they feel confident that they can replace the other tenant within 6 months. Hope this helps

Apr 20, 2011
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Matthew C.
Broker/Agent
Indianapolis, IN

Its questions like this that I love to see. It takes a true commercial professional to be able to understand these terms Steve. Andy has the best explanation of what it is. I just wanted to point out that it is absolutly an excellent "meet in the middle" compromise if you will. Obviously your goal as a tenant is to minimize risk and so is the landlords so buy doing this you both get close to what you want. And i have heard it said "in a true compromise no one wins".

Apr 20, 2011
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