1st Commercial Lease

[40 Thieves]

Well I've pretty much been working now for the past 4 months finalizing the specifics of an evening and afterhours lounge. Financing is there, location is good, business plan is in place, legals all in line. I'm getting ready to close on my first commercial lease! To any club owners out there what is your opinion on a personal guarantee? I'm of course considered a mom and pop looking at a 5 yr lease. I don't think there is a way around this since I don't have the full amount of the lease term in the bank. The company is a LLC and understand legal liabilities but why a personal guarantee when I'm signing a lease? Also are there lower term length personal guarantees that people have set up with longer lease terms? Any info would help.

[ontheway]

I have just negotiated my second lease to open my next location. Guarantees are almost always going to be necessary. I always start with the least amount of liability to myself personally. The last lease i negotiated a 5 year lease with three 5 year options. I did it this way in case i felt it was time to get out at a certain point simply from myself getting older and not wanting to be involved as much or whatever. The leasing company wanted a guarantee for the initial 5 years. I told them i would give them a 2 year guarnatee from the LLC. Of course they rejected. We then went to 1 year personal. I came up with this for two reasons. The company will always feel better if they can go after an individual personally, instead of an LLC that can go bankrupt if they are failing in operations. I do not like going over one year personally and i explain to them that they should always be able to find a new tenant in a 12 month period.

One last detail to pay attention to is how the guarantee is written. I was able to get my guarantee to be 1 year from the commencement date of the lease. So after my abatement period ends and i begin paying rent the guarantee will end 12 months from that day. Some will try to word there leases to give them the guarantee for the amount of one years rent anytime during the 5 year lease or whatever the leasse has left. A way to make sure you get this is to have an addendum drafted statiing that 12 months from commencement the section with the guarantee (i.e, exhibit 32) becomes null and void.

Hope some of this helps.

[40 Thieves]

Absolutely - thanks for the insite. I was familiar with the personal guarantee and said that I would agree to one but I was thinking that most people guaranteed the whole 5 years... which is ludacris. Thats why I posted. Your information is truely valuable. Thanks.