I have 4 people on a commercial building lease they all have signed as personal guarantors although there set up as a LLC

Asked 6 months ago - Evansville, IN

each with shares. Two sale there shares to the other two with a side agreement that they will be released as personal guarantors once the sale has taken place, this was to relieve them in case the business fails, this has been done with out the lessor knowledge and once the lease term had expired they renewed with an early exit date. My question is, there side deal with there partners relieve them of there responsibility's to the lease as guarantors ?

Attorney answers (1)

  1. Michael Ray Smith

    Contributor Level 8

    1

    Lawyer agrees

    Answered . I'm not entirely sure I understand our question, so let me summarize the facts: LLC signs lease with Landlord. Four members of LLC sign personal guarantees promising to pay to the Landlord the LLCs obligations, should the LLC not pay. Two of the four members sell their interest to the other members. The four members also signed a side agreement without Landlord's knowledge that purports to relieve the two departing members of their obligations to the Landlord under their personal guarantees.

    Under those facts so far, it does not appear to me that the side agreement among the four LLC members affects the personal guarantees to the Landlord. If the LLC defaults, it appears that the Landlord could sue all four members under their personal guarantees. Perhaps (depending on the language of the side agreement) the two former members could sue the two remaining members to reimburse them for any amounts they had to pay to Landlord, but that's just between the members themselves -- it doesn't affect the Landlord's rights.

    HOWEVER -- you mentioned a lease renewal that appears to have some terms that are different from the original lease, and that may change things. In that case, it seems unlikely to me that the two former members have any obligation to the Landlord under the renewed lease. In fact, it's possible that the two remaining members have no personal obligation either, unless they signed new guarantees.

    However, it's impossible to give a definitive answer to a question like this without seeing the actual documents in question. If you really need an answer, I suggest you consult with an attorney.

    I am licensed to practice law only in Indiana. The answer to this question should not be considered legal advice... more

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