Personal Guarantee on a Commercial Lease: What You Owe and How to Get Out
Part of the guide: Commercial Lease Lawyer Services in Chicago.
The lease terms are settled. Your LLC is the tenant. Then the landlord's broker sends one more page. The title is "Guaranty of Lease." The signature line carries your name, not the company's name.
That page decides what you lose if the business fails. Your LLC protects you from most company debts. It does not protect you from a promise you sign yourself. The Illinois LLC Act, 805 ILCS 180/10-10, says this directly. A member is not personally liable "solely by reason of being or acting as a member." The same section keeps liability that comes from the law of contracts. A guaranty is a contract.
A personal guarantee makes you pay what the business does not. A full guarantee covers all rent and charges for the whole lease term. Negotiate before you sign, because your leverage ends at signing. Ask for a cap, a good guy clause, or a burn-off date. Strike the paragraph that keeps you liable after amendments and assignments. Illinois courts read unclear guarantee language in your favor. They enforce clear language as written. Selling the business does not end the guarantee by itself. A written release from the landlord ends it early.
Sources: 735 ILCS 5/13-206; Chicago Exhibitors Corp. v. Jeepers! of Illinois, Inc., 376 Ill. App. 3d 599 (1st Dist. 2007). The verdict covered unpaid rent and property damage.
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What Does a Personal Guarantee Make You Pay?
A personal guarantee is your promise to pay the tenant's lease debt if the tenant does not pay. A judgment on the guarantee is a judgment against you, not against the company.
Illinois requires this promise in writing. The Frauds Act, 740 ILCS 80/1, covers any "special promise to answer for the debt, default or miscarriage of another person." That promise, or a memorandum of it, must be "in writing, and signed by the party to be charged." Otherwise no one can sue on it. So a landlord who wants your personal promise asks for your signature.
Read what the guarantee covers. In one Illinois case, the guarantors promised "the payment of all Rent and other charges to be paid by Tenant." They also promised the tenant's performance of every lease term. And they promised to pay the landlord's "reasonable attorneys' fees and costs" to enforce the guarantee. The trial court awarded the landlord its attorney fees. That is a full guarantee.
Full, Capped, Good Guy, or Burn-Off?
A guarantee comes in one of four shapes. The shape sets your worst case.
| Type | What you owe | Who it favors |
|---|---|---|
| Full | All rent, whole term | The landlord |
| Capped | Up to a stated limit | Both sides |
| Good guy | Rent until you leave | The tenant |
| Burn-off | Less as years pass | The tenant, over time |
Full guarantee
You owe what the tenant owes, for the full lease term. The guarantee does not stop when the business closes.
Capped guarantee
The guarantee states a maximum. The cap can be a dollar figure or a number of months of rent. In a bank loan case, the Illinois Supreme Court treated a stated maximum as a limit on the guarantor's liability. The debtor owed more than the cap. The guarantors still owed only the cap, plus the interest the guarantee added. McLean County Bank v. Brokaw, 119 Ill. 2d 405 (1988).
Good guy guarantee
A good guy guarantee ends your liability when the tenant leaves on agreed terms. The words "good guy" do nothing on their own. The conditions in the clause do the work. Look for these conditions:
- Written notice to the landlord, a set number of days ahead.
- Rent and charges paid through the surrender date.
- Keys returned, and the space empty and in the agreed condition.
Meet every condition, and the guarantee stops at the surrender date. Miss one, and the clause may not protect you.
Burn-off guarantee
A burn-off guarantee ends after a period of on-time rent. A step-down version lowers the cap each year instead. Read whether a default before the burn-off date cancels the burn-off.
How Do Illinois Courts Read a Guarantee?
Illinois courts start in your favor. The Illinois Supreme Court stated the rule in Brokaw:
"A guarantor is to be accorded the benefit of any doubt which may arise from the language of the contract, and his liability is not to be varied or extended by construction or implication beyond its precise terms."
The appellate court applied that rule to a lease guarantee in T.C.T. Building Partnership v. Tandy Corp., 323 Ill. App. 3d 114 (2001). The tenant gave late notice of a lease extension. The landlord accepted it anyway. The court held that a guarantor is not liable, without consent, for an extension made outside the lease.
Tandy still lost the appeal. Its guarantee said the landlord's waiver of any lease condition would not release it. The court enforced those words. The court added a limit. The benefit applies "only where some doubt arises as to the meaning of the guaranty language." Clear words bind you.
Courts give you the benefit of unclear words. Courts enforce clear words exactly. So fix the words before you sign. After you sign, the words are the guarantee.
The paragraph that matters most
Illinois law can release a guarantor when the lease changes. The court in Chicago Exhibitors Corp. v. Jeepers! of Illinois, Inc. stated the test. A guarantor is not released "unless the essentials of the original contract have been changed." The tenant's required performance must also be "materially different from that first contemplated."
A guarantee can waive that defense in advance. The Jeepers guarantee said the guarantors "shall not be released or affected by" lease modifications, extensions of time, or an assignment of the lease. The landlord later signed a new agreement with the tenant alone. The guarantors did not sign it. The court held the guarantors liable anyway.
Strike or narrow the waiver paragraph before you sign. If it stays, the landlord and the tenant can change the lease without you. You stay on the hook for the changed lease.
What Should I Negotiate Before I Sign?
Your leverage is highest before the lease is signed. After signing, the landlord has no reason to give anything back. Ask for these terms, in this order:
No guarantee at all.
Offer a larger security deposit or a letter of credit instead. A landlord who wants security may accept a different form of it.
A cap.
Limit the guarantee to a dollar figure or a fixed number of months of rent.
A good guy clause.
Your liability ends when you give notice, pay through surrender, and return the keys.
A burn-off date.
The guarantee ends after a stated period of on-time rent.
A narrow waiver paragraph.
Require your written consent to any amendment, extension, or assignment of the lease.
A release on assignment.
The guarantee ends when the landlord approves a buyer who signs a new guarantee.
Separate signatures.
Sign the lease for the LLC, with your title. Sign the guarantee as yourself.
In my commercial lease guide, I tell the story of four words about signage in a salon lease. The lesson carries over to the guarantee. A vague lease term is never actually vague. Somebody already knows the real answer. Make them write it down before you sign. The same guide covers CAM charges and buildout terms. Those terms feed the number you guarantee.
A new business with no track record is a real risk to a landlord. The landlord holds the space for you and turns away other tenants. A full guarantee can be the price of a good location. If the landlord will not move, decide whether the space is worth your personal exposure. Sometimes it is. Sometimes the right answer is a different building.
"Read the guarantee as if the business already failed. That is the only day it matters."
Send Me the Guarantee Before You Sign It.
Tell me about the space and the lease term. Send me the landlord's draft guarantee. On a free call, I will tell you your worst case under it. I will tell you which terms to ask for. I quote the review fee on the same call.
All consultations are confidential.
What Happens If the Business Defaults?
A landlord can move on two tracks. One track takes back the space from the tenant. The other track collects the money. In Jeepers, the landlord first got an agreed eviction order against the tenant. Later, the landlord sued the tenant and the guarantors together for unpaid rent and repairs.
The clock is long. Illinois allows 10 years for an action on a written lease or written contract. 735 ILCS 5/13-206. The statute restarts the period after "any payment or new promise to pay has been made, in writing."
Do not sign anything new as guarantor until you read it. In Jeepers, the guarantors sold their interest in the business. Years later, they signed a lease amendment that reaffirmed their guarantee. The court held them to it.
Landlords, this works in your favor. I handle Chicago commercial evictions for landlords. The eviction recovers the space. The guarantee gives you a second person to collect from.
How Do I Get Out of a Personal Guarantee?
A guarantee ends in one of five ways. Each one needs paper.
| Exit route | Ends the guarantee? | What you need |
|---|---|---|
| Lease term ends | For future rent | No extension you guaranteed |
| Good guy surrender | Yes, per the clause | Notice, rent, keys |
| Burn-off date | Yes, per the clause | Clean payment record |
| Termination agreement | Only if it names you | Your written release |
| Sale of the business | Only with a release | Landlord's signed release |
A lease termination agreement
A landlord and a tenant can agree to end the lease early. Make sure the agreement releases you by name, as guarantor. In Jeepers, the landlord signed a later agreement with the tenant alone. That agreement did not release the guarantors. Ask for release language that does three things:
- It names you as the guarantor.
- It releases the guarantee itself, not only the lease.
- It covers amounts already owed and amounts not yet due.
Selling the business
Selling the business does not end your guarantee by itself. The buyer takes an assignment of the lease, with the landlord's consent. If your guarantee says an assignment does not release you, the guarantee follows the lease. Ask the landlord to accept the buyer's guarantee in place of yours. Put your release in the assignment, signed by the landlord. My guide to selling your business treats release of the seller's lease guarantee as a closing condition.
When the business has already failed
If the tenant is already in default, the guarantee is live. Negotiation still works. A guarantor can offer an early surrender of the space and a lump sum. In exchange, the guarantor asks for a full written release. Get the release signed before you pay.
I review commercial leases and guarantees for business owners, quoted after a free call. See my small business attorney page.
Frequently Asked Questions
Does a personal guarantee have to be in writing in Illinois?
Yes. The Illinois Frauds Act, 740 ILCS 80/1, covers a promise to answer for the debt of another person. The promise, or a memorandum of it, must be in writing. The person charged must sign it. Otherwise no one can sue on the promise. That is why the landlord asks for your signature on a guaranty.
What is a good guy guarantee?
A good guy guarantee limits your liability to the time the tenant stays in the space. It ends when you meet the conditions in the clause. Look for written notice, rent paid through the surrender date, and the keys returned. Miss a condition, and the clause may not protect you.
Does selling my business end my personal guarantee?
Not by itself. In Chicago Exhibitors Corp. v. Jeepers! of Illinois, Inc., 376 Ill. App. 3d 599 (2007), the guarantors sold their business. Their guarantee said an assignment of the lease would not release them. They also signed a later amendment that reaffirmed it. The court held them liable. Get a written release, signed by the landlord, that names you.
Will an Illinois court read my guarantee in my favor?
Only where the words are unclear. The Illinois Supreme Court gives a guarantor the benefit of any doubt in the contract language. McLean County Bank v. Brokaw, 119 Ill. 2d 405 (1988). Clear terms are enforced as written. T.C.T. Building Partnership v. Tandy Corp., 323 Ill. App. 3d 114 (2001).
How long can a landlord wait to sue me on the guarantee?
Illinois allows 10 years for an action on a written lease or a written contract, under 735 ILCS 5/13-206. The 10 years run from the date the claim accrued. A payment or new promise to pay, made in writing, can start a new 10-year period.
Related Reading
- Commercial Lease Lawyer Services in Chicago: lease types, CAM, signage, and buildout terms.
- How to Sell Your Business in Illinois: the lease assignment and the guarantee release at closing.
- LLC Rental Mortgages: the personal guarantee on the loan side.
- Chicago Commercial Evictions: the landlord's side of a tenant default.
Sources
- 740 ILCS 80/1 (Frauds Act), read 2026-10-12 at ilga.gov.
- 805 ILCS 180/10-10 (Limited Liability Company Act, liability of members and managers).
- 735 ILCS 5/13-206 (ten year limitation).
- McLean County Bank v. Brokaw, 119 Ill. 2d 405 (1988).
- T.C.T. Building Partnership v. Tandy Corp., 323 Ill. App. 3d 114 (1st Dist. 2001).
- Chicago Exhibitors Corp. v. Jeepers! of Illinois, Inc., 376 Ill. App. 3d 599 (1st Dist. 2007).