A personal guaranty in a lease is a clause — sometimes a separate document — in which you, the individual, agree to be personally responsible for the lease if your business can't pay.
Without a personal guaranty, only your business entity is on the hook. If your LLC defaults on the lease and closes with no assets, the landlord has no recourse against you personally. The personal guaranty changes that. It bypasses the liability protection your LLC was designed to provide and makes your personal finances — savings, home equity, personal credit — available to satisfy the lease obligation.
Commercial landlords require personal guaranties because business entities can fail and disappear. An LLC that defaults on rent can dissolve with nothing left to collect from. A personal guaranty gives the landlord a person to pursue — someone with assets, income, and a credit score that matters to them.
The requirement became near-universal after the 2008 recession, when thousands of business tenants closed and left landlords with empty spaces and no recourse beyond the business entity. For small businesses and startups without an established financial track record, a personal guaranty is almost always a condition of getting the lease signed.
When you sign an unlimited personal guaranty on a commercial lease, you are agreeing that if your business defaults — for any reason, at any point during the lease term — you personally owe whatever rent remains unpaid through the end of the lease term.
On a 5-year lease at $6,000/month, signing an unlimited personal guaranty means your maximum personal exposure is $360,000. If your business closes in year two with three years left on the lease, you personally owe up to $216,000 — even if the LLC has no assets and even if the business failure had nothing to do with your personal financial management.
Not all personal guaranties expose you to the full lease obligation. A limited guaranty caps your exposure in one of several ways:
A rolling guaranty limits your liability to a defined window — typically 12 to 18 months of rent — regardless of when default occurs or how much lease term remains. A burn-off guaranty starts unlimited but expires after a period of on-time payments, typically 24 to 36 months. A capped dollar amount guaranty sets a fixed ceiling — say, 6 months of rent — as the maximum you can owe under any circumstances.
An unlimited guaranty with no limit, no cap, and no burn-off is the version that creates the most personal financial risk. It's also the version most landlord templates default to.
Push for a rolling 12-month limit. This caps your worst-case personal exposure at 12 months of rent regardless of what happens to the business or how much lease term remains. It's a standard ask that most landlords will consider for tenants with reasonable financials.
If the landlord won't accept a rolling limit, ask for a burn-off after 24 months of on-time payments. Frame it as earned trust — you're asking them to recognize a track record you'll build, not asking them to take on additional risk upfront.
If you're in a community property state — Arizona, California, Texas, Washington, and several others — be aware that your spouse's assets may be exposed if they co-sign. Understand what you're both agreeing to before both signatures go on the page.
Run your lease through LiabilityScore™ to see exactly what your personal guaranty says — whether it's unlimited or limited, what the cap is, and what a fair version looks like for your situation.
Before you sign, get a score.
Upload any contract to LiabilityScore™ and get a 0–100 risk score with a plain-English breakdown of every risky clause — in under 60 seconds.
Scan your contract free →Important
This article is for educational purposes only and does not constitute legal advice. LiabilityScore™ identifies potentially risky contract terms — it is not a substitute for review by a licensed attorney. Always consult qualified legal counsel for advice specific to your situation.