Have Guarantor Sign Lease Termination Agreement

If you and a tenant agree to sign a lease termination agreement that says that the tenant's guarantor will remain on the hook after the lease terminates, also have the guarantor sign the termination agreement, advises Denver attorney Mark A. Senn. Otherwise, the guarantor could argue—and a court could agree—that the termination agreement releases the guarantor from its obligations to you, he warns.

A Florida owner learned how important it is to get the guarantor's signature on a termination agreement. The owner had accepted a guaranty that said the guarantor's obligations would remain in effect as long as the tenant's obligations under the lease were in effect. Also, the guaranty said it could be amended only by a written document signed by both the owner and guarantor. The owner eventually terminated the lease because of the tenant's failure to pay rent. The owner and tenant—but not the guarantor—signed a lease termination agreement that said the agreement didn't release the guarantor from its obligations. The owner then sued the guarantor under the guaranty to recover the rent owed. But the guarantor argued that it was released from its obligations by the termination agreement. By not signing the agreement, the guarantor hadn't consented to remaining on the hook.

A Florida appeals court ruled that the guarantor wasn't responsible for the tenant's rent payments. When the termination agreement ended the tenant's obligations, the guarantor's obligations ended as well, the court said. And since the guarantor didn't sign the termination agreement, the owner couldn't argue that the agreement amended the guaranty [Amerishop Mayfair, LP v. Billante].

CLLI Sources

Mark A. Senn, Esq.: Partner, Senn Visciano Kirschenbaum Merrick, PC, 1801 California St., Ste. 4300, Denver, CO 80202; (303) 298-1122; msenn@sennLaw.com.