If my business fails and I have a personal guarantee on my commercial lease, what am I personally exposed to?
The short answer
When a business closes and a personal guarantee is in place on a commercial lease, the guarantor may be personally liable for the obligations the guarantee covers — which could include remaining rent, operating charges, damages, and in some leases, the landlord's costs. What the guarantee actually covers, for how long, and whether it has any limits is defined by its wording, not by general rules. Questions about which personal assets may be reachable by a judgment creditor — including whether a home is protected — involve legal and financial considerations that vary by state, individual circumstances, and the terms of any applicable exemptions; those questions are best addressed with a qualified attorney. Scan your lease to see what your guarantee says and consider having it reviewed before a crisis point.
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What the guarantee clause usually covers
A personal guarantee in a commercial lease typically makes the guarantor — often the business owner — personally responsible for the tenant entity's obligations under the lease if the entity cannot pay. The scope of that obligation is defined by the guarantee's language: it may cover all rent through the end of the term, a capped number of months, or only certain charges. Some guarantees explicitly include operating expenses, CAM reconciliation amounts, attorneys' fees, and build-out repayment obligations; others cover only base rent. A guarantee with no stated cap that runs for the full lease term can expose the guarantor to the full value of the remaining lease if the business closes early.
The landlord's next steps after a business closure depend on the lease terms, local law, and practical considerations — including whether re-letting the space quickly is feasible. Some leases include acceleration clauses that allow the landlord to demand all remaining rent immediately upon default; others proceed month by month. Whether and how quickly a landlord pursues a personal guarantee varies, but the guarantee typically survives the business entity's closure.
Why people worry
The 'can they come after my house?' question is among the most commonly reported fears in small-business commercial leasing. Business owners often structure their businesses as LLCs or corporations specifically to limit personal liability — and a personal guarantee is a direct contractual workaround to that structure. Whether any specific personal assets are reachable following a judgment involves questions about state exemption laws, the form of ownership, prior encumbrances, and the specific terms of the judgment — all of which vary and are beyond what the guarantee document alone can answer.
What to look for in your lease
- Whether the guarantee is capped at a defined number of months or dollar amount.
- Whether the guarantee includes a burn-off: does it reduce or terminate after a period of on-time payment?
- What specific obligations the guarantee covers beyond base rent — CAM, operating expenses, damages, legal costs.
- Whether the guarantee includes an acceleration clause that makes all remaining rent due immediately upon default.
- Whether a good guy provision limits personal exposure upon a compliant early surrender.
Questions to ask before signing
- Ask the landlord to confirm the full scope of obligations the personal guarantee covers, in writing.
- Ask the other party to clarify whether the guarantee includes operating charges and attorney's fee provisions.
- Confirm whether any cap, burn-off, or good-guy protection is available to limit personal exposure.
- Consider having the lease and guarantee reviewed by a qualified attorney before signing, particularly if the guarantee is uncapped and the lease term is long.
Why scan instead of guess
The general rule tells you the baseline. Your lease tells you what you’re actually being asked to sign — and the wording is what binds. Dang reads the document and flags the clauses worth reviewing, in plain English.
The deterministic engine scores and decides what’s risky. The AI only enriches the plain-English wording — AI extracts, code decides, never the other way around.
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Common questions
Does forming an LLC protect me from a personal guarantee?
An LLC generally limits personal liability for business debts — but a personal guarantee is a separate, direct contractual obligation signed by you individually. By signing a personal guarantee, you agree to be personally responsible regardless of the LLC structure. The guarantee is what removes the protection the LLC would otherwise provide.
What happens to the personal guarantee if I just close the business and walk away?
The guarantee typically survives the business closure. The landlord generally retains the right to pursue the guarantor personally for whatever obligations the guarantee covers. What the landlord does next — and what a court would order — depends on the lease terms, the guarantee's scope, and applicable law. Whether and which personal assets are reachable is a legal question that depends on circumstances beyond the lease document.
Is there any way to get out of a personal guarantee after signing?
Negotiating a release requires landlord agreement, which landlords rarely grant without a significant concession — such as a lump-sum payment, a replacement guarantor, or new tenant substitution. Whether any release is possible depends on the relationship, the market, and the landlord's own position. The time to limit a guarantee's scope is before signing.
No account required · File deleted after analysis · Not legal advice. Dang reports contract findings in plain English — general information, not legal advice about your situation. For consequential decisions, consult a licensed attorney in your state.