AboutJim Avancena Expertise I am best qualified to answer any questions that involve commercial leases, the complexities and inter-relationships of the myriad provisions that a lease may contain, and explain how they commonly effect a landlord or tenant in their day-to-day business operation. I can explain most matters that will come up during of the full lease cycle from standard industry practices regarding the lease acquistion process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of other problems that may come up during the lease term. I have practical experience with most property management issues and resolving landlord and tenant disputes. Note that I am not an attorney and cannot provide legal advice.
Experience Twenty-eight years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area(DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.
Organizations Currently my three children keep me so busy that it is difficult to find time to participate in organizations.
Publications I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 page)feature story on January 13, 1993; "Overcharging Overhead".
Education/Credentials BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license licensed in Maryland and the District of Columbia.
Awards and Honors Routine, the same plaques and honors that most others in my industry have earned, none that are significant.
Past/Present Clients Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.
Question QUESTION: Jim,
I am partners with two other individuals in a restaurant venture that opened 5 months ago. We signed a 10 year lease with each of us signing a personal guaranty. I am transferring my interest in the restaurant over to my 2 partners. All the arrangements have been finalized with the exception of the lease with the landlord. One of my partners contacted the landlord and heard today that they will let me off the day to day responsibilities but will not let me out of the personal guaranty. We are only 5 months into this 10 year lease and I need to get out. How can I accomplish this. I know there must be a way. What is your opinion on this situation and how do I go about getting my name off the lease? My 2 partners are very secure financially. Is there a way that I can have them guaranty the landlord or me in case they default under the lease to get me out of the lease?
ANSWER: Lou-
Never give a written personal guaranty unless you are certain you will continue in the undertaking for the full term that you provide the guaranty.
The landlord feels that he has something of value- your guaranty that you will make good on any financial deficiencies - and he will not give up something of value for nothing. He is not in the business to be a nice guy that lets tenants out of their obligations - its not personal, just business.
You could discuss the possibility of offering him something else of value to trade to terminate your guaranty obligation. A termination fee of some amount might be of interest to the landlord. This would be a legally binding agreement signed by both you and the landlord and it would stipulate that you will pay the landlord X amount of dollars and in return the landlord agrees that your guaranty responsibility is thereafter extinguished in full, and of no further effect.
Beware, once you open up this concept to the landlord, there is no telling the amount the landlord will want. There are no rules in this process, you simply negotiate.
Do you or your partners have anything else which your landlord would potentially find of value? These things can get very ugly if you are not careful. I am sorry, but there is no surefire way to get the landlord to let you escape your guaranty obligation.
Good luck with your negotiations.
-Jim
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QUESTION: Jim,
Thanks so much for the quick response.
How about if I have a written personal guaranty from my partners stating that they will guaranty to the landlord my share of my personal guaranty if they default on the lease? Would or could something like this work? Their lawyer says that this would be a possibility.
Thanks
Lou
ANSWER: Lou-
I think another guaranty from the same two individuals already responsible for for debts of the lease will not be seen as adding value from the landlords perspective. I do not agree with the attorney.
The landlord will want something of real value. You might introduce another 3rd partner to the group that would also be involved with the under taking, but the landlord will want to see detailed financial records from the new partner that clearly shows the new partner has equal or greater financial standing that you have offered him.
This is a tough situation. Why did you get involved in a ten year lease and guaranty if you had to escape liability so quickly?
If your partners are not interested without you involved, perhaps you can sublease your leased space - but you will still remain personally liable for the sublease financial obligations.
Sorry, I do not know of any magic to have this problem go away.
Good Luck.
-Jim
---------- FOLLOW-UP ----------
QUESTION: Jim,
Sorry, What I was attempting to say in the last question is suppose that my 2 partners guaranty in writing to ME that they will indemnify me in case they default on the lease. Would that be worthwhile looking into?
Answer Lou-
Your idea may be the best that you can do at this stage in the process. I would discuss the specific requirements of such an agreement with an attorney to assure that your partners abide by the agreement. If the landlord chooses to file a lawsuit against you to collect on a judgement against your partners, be certain that the agreement with your partners is binding and they agree to indemnify you regarding any award in such an action. Remember, the landlord will continue to have the right to file an action against you for a default by your partners.
Note, that YOU, like the landlord, will be in the position of reliance on your partners continuing to maintain sufficient funds throughout the full term of the lease to cover a judgement in the favor of the landlord.
