What happens after you have signed a lease guarantee

What happens if you breach a guarantee in a commercial lease?

A commercial lease guarantee means you promise your landlord to follow the lease rules and pay your rent. If you break the agreement or can’t afford your commercial property rent, the landlord can use the guarantee. Then, your guarantor has to pay.

 

What can occur if you can’t afford commercial office rent after signing a lease guarantee?

We know this is serious and you may be feeling overwhelmed. Before taking action, please read the following details and get in touch with us to explore other options. Remember, support is available, so you’re not facing this challenge alone.

As a director of a struggling business, you may face personal liability, which is unfortunate. Even if you’re a director of a limited liability company, you could be held personally accountable for company debts if you signed a personal guarantee for renting commercial offices or business space.

Directors often contact us daily, concerned about affording rent when they’ve signed a lease guarantee. The outcome isn’t always straightforward, but here are some points you might want to consider.

 

Be Cautious Before Signing The Lease Guarantees

It’s always wise to fully comprehend what you’re signing before agreeing to the lease contract. While you might be eager to get your business up and running by occupying the space, have you carefully reviewed the fine print?

Directors often make the mistake of using their home or other crucial assets as security when signing a lease guarantee due to eagerness to start their business. 

We strongly advise them to consider the potential consequences if they can’t pay the rent in the future. Imagine the devastation of losing your home!

 

Why Landlords Demand Guarantees: Understanding the Reasons!

Naturally, landlords seek assurance that tenants can afford the rent, particularly for commercial spaces which are typically larger and more costly than residential rents. Therefore, most landlords assess the creditworthiness of the business, and if it’s insufficient, they may require a personal guarantee.

It’s important to remember this when dealing with a landlord who is close to enforcing a lease guarantee. They simply want to receive rent for their investment or income properties. We can assist in negotiating with landlords who are determined to receive payment promptly.

 

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Preventing the Impact of Failing a Lease Guarantee

Maybe we can assist in setting up a CVA (Company Voluntary Arrangement) with your creditors. You might have other secured debts too, so resolving all your debt concerns at once could be a wise move.

A licensed IP (Insolvency Practitioner) from Vanguard Insolvency can assist throughout the CVA process, starting from your initial meetings with directors and members to the final agreement, which will be acknowledged by the courts.

A CVA must be managed by an Insolvency Practitioner according to UK regulations, but it’s crucial to rely on someone with a proven track record of success. Trust in Vanguard Insolvency, serving businesses across the UK for over two decades.

If a CVA isn’t suitable for your company, don’t lose hope as there are other rescue options available. 

Funding and finance could help you navigate through a temporary setback, and we can guide you in the right direction. From invoice factoring to small business loans, there may be financial assistance options accessible to you.

If none of those options are viable, you might want to explore Company Administration to reorganise your business model or even pre-pack administration to begin anew with new owners. Struggling businesses have numerous options available, so it’s vital to find the one that aligns best with your needs.

Don’t despair if your landlord is threatening to enforce your lease guarantee. The insolvency specialists at Vanguard Insolvency are available to help navigate you through this challenging period.

Let us assist you in preserving what you’ve diligently built, both in your commercial ventures and personal assets. Contact us today so we can help you steer clear of the repercussions of defaulting on a lease guarantee.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.