Tenant Wishes to Terminate Lease With Notice and Forfeiture of Security Deposit
Full Question:
Answer:
The situation is one of personal judgment, based on all the facts and circumstances involved. Landlords often ask for a personal guaranty from a business owner, and may refuse to rent the space without one. A personal guaranty provides that the "guarantor" (usually, the business owner) will make good on any lease payments that the business itself fails to pay. Effectively, a personal guaranty adds the business owner as an obligated party to the lease. If you provide a personal guaranty, it enables the landlord to collect the rent from either the business owner or the company.
Some landlords will include a "good guy clause" in the lease. This provides that, in the event that a business needs to terminate a lease early, the landlord will not enforce the personal guaranty as long as the business has vacated the premises and has paid all rent up to the date of termination. This can allow business owners a "way out," and might save the business owner from having to declare personal bankruptcy. However, the landlord may still look to the business to continue to make all rent payments through the end of the lease. Some good guy clauses will only allow the tenant to get out of the personal guaranty in the event that the company is going out of business, rather than any general desire to terminate the lease.
In some cases, the tenant may negotiate the right to replace a personal guaranty with a letter of credit. A letter of credit is a document issued by a financial institution, usually the company’s bank, that acts as an irrevocable guaranty of payment up to a preset amount to a beneficiary (landlord), when some defined preconditions are satisfied. For example if the condition is the tenant’s failure to make a required payment, the letter will provide that the landlord is free to present it to the issuing bank along with a signed statement of how much you owe. The bank is then obligated to immediately pay that amount to the landlord. The letter of credit in effect makes the bank the guarantor of your company’s compliance with the lease
Some of the factors, among others, that may be considered include:
- The company’s financial strength and experience
-Does the personal guaranty cover just the “guarantor” or “guarantor and its assigns
-Is the business the business owner’s sole source of income? : If the business cannot make enough money to meet its expenses, it is unlikely that business owner herself will be able to make the payments in its place. Therefore, the business owner’s only solution may be to file for bankruptcy protection.
The following are FL statutes:
83.09 Exemptions from liens for rent. —
No property of any tenant or lessee shall be exempt from
distress and sale for rent, except beds, bedclothes and
wearing apparel.
83.08 Landlord's lien for rent. —
Every person to whom rent may be due, the person's heirs,
executors, administrators or assigns, shall have a lien for
such rent upon the property found upon or off the premises
leased or rented, and in the possession of any person, as
follows:
(1) Upon agricultural products raised on the land leased or
rented for the current year. This lien shall be superior to
all other liens, though of older date.
(2) Upon all other property of the lessee or his or her
sublessee or assigns, usually kept on the premises. This
lien shall be superior to any lien acquired subsequent to
the bringing of the property on the premises leased.
(3) Upon all other property of the defendant. This lien
shall date from the levy of the distress warrant hereinafter
provided.