Encyclopedia
Guarantor
A person or company that promises to pay a tenant's obligations if the tenant doesn't.
For example: A landlord asks a new company's owners to sign as guarantors, and they negotiate a cap and an end date. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you open a new business through a limited company. The landlord asks you to personally back the lease because the company has no track record. You negotiate a cap on the amount and a time limit, so your personal exposure is limited.
What I’d tell a friend
Limit any personal backing you give for a lease. Negotiate caps and an end date.
Why it matters to you
A guarantor can be personally responsible if the tenant doesn't pay. If you're asked to guarantee, limit the amount and time if you can.
How to use it in your deal
Tenants and owners asked to guarantee should negotiate limits: a cap on the amount, often tied to a set number of months of rent, a guarantee that ends after a few years of on-time payments, and release if the lease is assigned to a strong new tenant. Read whether the guarantee covers renewals, extensions and amendments, since many do automatically.
Get your own legal advice; a guarantee can reach your house and savings. Landlords should check the guarantor's finances, get proper wording and keep it updated when leases change. Buyers of buildings should confirm guarantees transfer with the leases. Lenders often want personal guarantees on small business loans too, and the same negotiating points apply. Spouses are sometimes asked to sign; think hard before agreeing.
Mistakes I see
Unlimited guarantees with no end date. Not reading renewal language. Assuming a sale of the business releases you. Landlords not checking the guarantor can pay.
In BC and Vancouver
Guarantees are contracts; BC courts enforce them according to their terms. Some protections exist for guarantors when the main contract changes, but wording often waives them.
Official sources: CanLII (court decisions)
What it means
A guarantor is a person or company who promises to pay or perform if the tenant does not.
Landlords often ask for one when a tenant is new or has limited finances.
What to negotiate
Ask for a cap on the amount, a time limit or release after a period of good payment.
Get advice from a BC lawyer before you sign.
Questions to ask before you sign
- What's the maximum I could owe?
- When does it end?
- Does it cover renewals?
- Am I released on assignment?
- Should my spouse sign?
Keep reading
Related terms: Indemnifier, Covenant (tenant)
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.