What Is A Good Guy Clause?
During my time as a commercial real estate broker specializing in Manhattan office space, I come across this question fairly often- “What is a good guy clause?” To this day, it is explained to tenants in a way that is inaccurate. I’d like to give a simplified answer to this question:
A Good Guy clause is a limited form of a personal guaranty. I liken it to a “no squatting” clause. Let’s say your company is called ABC, Inc. and you have just signed the Good Guy clause which is attached to your lease. While there are many variations of the clause, its essence is this:
ABCD Inc. will pay rent in a timely fashion to the landlord. However, if there ever comes a time when ABCD Inc. fails to pay the due rent to the landlord and the company still physically remains in the office space, during that time, the responsibility to pay rent to the landlord is your personal responsibility. If you, as the company owner, wish to escape any personal liability to pay rent to the landlord, you agree that if ABCD Inc. reaches a point where it cannot pay rent, you will make sure the rent is current, remove your belongings from the space and deliver the keys back to the landlord. After that time, the landlord can still sue ABCD Inc. for rent that is due during the course of the remaining lease term. However, he cannot sue you personally.
That is the essence of a Good Guy clause. Please note that you must seek an attorney’s services in reviewing the lease and the good guy clause as they will have variations. This is not a substitute for legal advice.
Those are some of the key points that any new tenant should know in regard to leasing office space in Manhattan.