Good Guy Guarantees – or GGCs – are frequently found in lease agreements for NYC properties. A Good Guy Guarantee offers benefits to both property owners and tenants, but up and coming commercial real estate investors may not know how they work.
Breaking Down Good Guy Guarantees
Most Good Guy Guarantees have three parts, despite the language used in the agreement. First, tenants residing in a New York City property must give notice in advance of the expiration of the lease if they plan on vacating. Second, Tenants must return the space in a clean condition and free of any obligations or liens, including subleasing arrangements. Third, all due rent must be paid in full up to the date the tenants move out of the property.
Good Guy Guarantees Benefit NYC Property Owners
At first blush, a Good Guy Guarantee may seem to favor tenants. However, once you start digging into NYC eviction laws, the picture becomes a bit clearer. Evicting a tenant can take upwards of a year. During the process, NYC property owners are not generating any revenue. Instead of sinking money into lawsuits, a Good Guy Guarantee ensures self-eviction and allows property owners to find new tenants quickly to maintain a steady cash flow. Even if tenants vacate without honoring the guarantee, a New York property owner can still pursue the tenant for assets and rent owed.
Are There Times When GGCs Aren’t Used?
Good Guy Guarantees, or Good Guy Clauses, do not always have to be a part of the lease. NYC property owners typically do not offer GGCs if the business tenants aren’t United States citizens. Also, if the business signing the lease is publicly traded, requiring a Good Guy Guarantee would be considered an insult. Additionally, if the tenant refuses to sign the GGC, it doesn’t have to be part of the lease, but it usually means a higher security deposit will be required. Deciding when to use Good Guy Guarantees can also depend on the credit history of the potential business tenants, the amount of rent they are going to pay, and the current conditions of the leasing market.
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