When landlords negotiate changes or rent renewals with existing tenants, it is easy to overlook a very simple but important part of the documentation process: the reaffirmation of an existing rent guarantee. When a tenant negotiates with the lessor a new or replacement lease or amends and requests an existing tenancy agreement, a lessor may run the risk that a court will dismiss a lessor`s liability if such a „new“ lease contains provisions that were not included in the original tenancy agreement. For example, in Lo-Ho LLC v. Batista, 881 N.Y.S.2d 33 (A.D. 1 Dept. 2009), a New York court refused to find that a lease guarantee involved obligations as part of a „rent extension“ negotiated between the lessor and the tenant, since the original tenancy agreement did not contain an explicit renewal or renewal option and the terms were too different from those of the original lease to be considered as a mere extension of the lease. The court ruled against the application of the lease guarantee, while the guarantee provided that „this guarantee would remain fully in effect and would remain effective with respect to the renewal, modification or renewal of the lease.“ See also Atlantic Properties LLC v. DiFiore, 968 N.Y.S.2d 847 N.Y.City Ct. 24.06.2013.
Confirmation of a guarantor`s guarantee for the tenant`s obligations under a tenancy agreement can be as simple as certain sentences accompanying the end of the tenancy change, the surety certifying that it accepts the terms of the amendment and confirms that its obligations under the guarantee remain fully in effect. In the absence of such confirmation, if the tenant is in default and the lessor must enforce the lease guarantee, a guarantor can defend himself against such an application by asserting that the changes to the amendment are so significant that they go beyond the scope of the obligations arising from the original guarantee and that the guarantee has not been extended to the tenant`s obligations under the lease agreement as amended. A well-developed guarantee should contain a language that provides that the guarantee is not affected by renewals, modifications, renewals or terminations of the lease. The guarantee should also include a language that states not only that it is not necessary to inform the owner of the changes to the lease, but also that no consent of the surety is required for such changes. The new shareholder guarantee under the leniency agreement may not be applicable. It is likely that the secured debt was relieved in the previous bankruptcy of the shareholder and that the new guarantee could be interpreted as a „confirmation“ of the former debt – compliance with section 524 (c) of the Bankruptcy Act must be enforceable. In addition, since the new guarantee was initiated by the lender`s actions, the lender may have breached the shareholder`s injunction to guarantee the lender`s liability. These facts must be taken into account: the borrower`s sole shareholder („shareholder“) signs a personal guarantee for the loan of his company. Due to circumstances that have nothing to do with the company, the shareholder files for bankruptcy and ultimately obtains Chapter 7 relief. Years later, the company found itself in financial difficulty and asked for the indulgence of its lender. Under a negotiated leniency agreement, the shareholder agrees to meet a new guarantee for the company`s obligations. However, depending on jurisdiction, it may be left to a court to interpret the language of the guarantee and decide whether the changes in the lease are significant enough to limit or discharge the liability of a surety.
Therefore, it is always advisable, as a supplementary guarantee, for a lessor to request confirmation of the guarantee instead of relying on waiver declarations in the lease guarantee, particularly when a letter or replacement tenancy agreement is entered into with an existing tenant or other changes that cannot be explicitly considered in the