For business owners, personal guarantors, particularly on the lease of their premises, should be avoided at all costs.
Any increase in the rate of business failures will expose business owners to personal liability for the debts of their business.
When a company fails, it is of no surprise to readers to learn that creditors will pursue the guarantors to pay any outstanding debt. Making matters worse, according to Worrells Accountants, most personal guarantees include a “charging” clause that makes their creditors a “secured creditor” over any real estate owned by the guarantor. Particularly with a loan of commercial premises, you are backing the landlord to manage its property in a continually efficient and businesslike manner.
We recommend to our clients that we negotiate either a cap on that potential liability or alternate security such as a higher security bond.
For all leasing enquiries, please contact Jacelyn Bristow at our office.