A good-guy guaranty is a type of guaranty in commercial leasing that permits the guarantor to be relieved of further liability to the landlord if certain conditions are met—usually that the tenant surrenders possession of the premises, is fully up to date on rent, and gives a set amount of notice (often 90 to 180 days). Once these conditions are met, the guarantor is off the hook. And while the landlord can still pursue the tenant for unpaid rent through the expiration of the lease term, if the tenant is a special-purpose entity, the landlord is unlikely to have any recovery.
But there is some fairly standard, and oft-overlooked, language in many good-guy guaranties that could permit a landlord to avoid this result. Indeed, several First Department cases have held that certain language in a good-guy guaranty is meant to incorporate language from the standard-form portion of most commercial leases requiring the landlord to give written consent before the tenant can surrender possession of the premises. And so, according to these cases, without the landlord’s written consent, the guarantor can’t satisfy the conditions required to invoke the good guy.
In this short video, Schlam Stone & Dolan partner Joshua Wurtzel discusses this evolving case law and provides advice on how landlords can maximize their leverage over commercial tenants and guarantors by attempting to avoid a guarantor’s purported exercise of the good-guy clause in a guaranty