Commercial lease guaranties, and what each one is worth
A lease can be sound and its guaranty worthless. The forms, what each one actually reaches, and the three-state rule that stops a rent roll overstating its own credit.
The forms, and what each reaches
| Form | Who is liable | What it covers | Where it is weak |
|---|---|---|---|
| Full corporate guaranty | A parent or affiliate entity | The full term, rent and performance | Only as good as that entity's balance sheet — a shell guarantees nothing |
| Limited corporate guaranty | A parent or affiliate entity | A capped amount, or a fixed number of months | The cap is often far below the remaining term's exposure |
| Personal guaranty, unlimited | An individual, personally | The full term | Reaches only what that person actually has, and collection is slow |
| Good guy guaranty | An individual, personally | Rent until the tenant vacates and surrenders properly | Does not guarantee the remaining term — it buys the space back, not the rent |
| Franchisee guaranty | The franchise operator | That operator's obligations | Not the brand. The sign over the door is not on the covenant |
| Letter of credit | A bank, on the tenant's collateral | A drawable amount, on stated conditions | Expires, and often shrinks on a burn-down schedule |
Two of these are routinely read as stronger than they are. A good guy guaranty is not a term guaranty — it makes an individual liable for rent only until the tenant hands the space back in the agreed condition, so what it really buys is a prompt, clean surrender instead of a holdover fight. And a franchisee guaranty is the operator’s covenant, not the national brand’s. Underwriting a franchised location against the brand’s credit is underwriting a company that never signed anything.
The three-state rule
Most rent rolls treat the guarantor column as a yes or no. It has three states, and the third is where the damage happens.
- Stated. The row names a guaranty. Something exists to evaluate.
- None stated. The row says in words that there is no guaranty. Somebody checked, and the answer was no.
- Unknown. The column is blank, or it says “TBD”. Nobody has looked yet.
A blank is not a denial, and a placeholder is not a covenant. Book an empty column as “no guaranty” and you have printed an affirmative negative the document never said. Book it as a guaranty and you have credited the deal with a covenant that may not exist. The only honest answer is that nobody knows yet, and that is a finding worth acting on — it is a list of leases to go and read.
DealWise classifies this column the same way, and “TBD”, “?” and “pending” all come back unknown rather than being counted either way.
Why one clause cannot speak for the whole string
Here is a value that appears in real rent rolls and defeats most automated readings:
Full corporate guaranty; no personal guaranty
Search that string for a negation and you will find one. Read it as a negation and you have just discarded a real corporate guaranty — and then reported the suite as having none, which is an affirmative claim the lease directly contradicts.
The string states one covenant and denies a different one. So it has to be read clause by clause: any clause that names a guaranty without negating it makes the whole value stated. That is how DealWise reads it, and it is the difference between an accurate rent roll and one that is wrong in the landlord’s favour.
The honest limit: a value that can’t be read as a negation lands in stated — including a bare company name that never uses the word “guaranty” at all. That is the direction the residual risk runs, and it is a deliberate choice rather than an oversight. The verbatim text is kept beside the number, so anyone who disagrees with a reading can see exactly what produced it. A silent bucket with no text under it would not offer that.
Weight by rent, not by suite count
The question a lender or a buyer is asking is not “how many of my tenants are guaranteed”. It is how much of my income sits behind a covenant I trust.
One 40,000 SF graded anchor alongside six small unrated tenants is a completely different building from six graded tenants alongside one large unrated one. Counted by suite, both are “one in seven”. Weighted by rent, they are opposite deals. Every share DealWise reports is a share of in-place base rent for that reason.
And the denominator matters as much as the numerator: credit attaches to base rent under a lease, so the base is in-place base rent across occupied suites — not NOI, and not total revenue. A vacant suite has no tenant and therefore no covenant, so it contributes nothing and is excluded rather than counted as a failure.
The share that matters most is the one nobody reports
A credit summary that says “100% investment grade” off the two suites that happen to carry a rating, while saying nothing about the other nine, is worse than no summary at all. It converts silence into a covenant.
So the share of rent behind nothing recorded is reported beside the bands, with the same weighting and the same tenant list, and it should be read first. If 61% of the rent has no credit information on it, that is the headline — not the composition of the other 39%.
The same logic applies to a partial rent roll. If some occupied suites have rent that could not be computed, every percentage above them is a share of an incomplete base, and the honest move is to say so before showing the shares rather than after.
Why two credit columns never get merged
Internal credit grades and agency ratings use overlapping letters and mean entirely different things. On an internal A/B/C/D scale, “B” is second best of four. On an agency scale it is deep speculative grade.
This is not hypothetical, and we know it from our own data. A single dropdown offering A, B, C, D, AA, BBB-, BBB and BB together — internal letters and agency notation in one list — produces a column that genuinely contains both, with no marker saying which is which. We inherited exactly that column, and one measured example is a local HVAC contractor occupying its own building, carrying AA.
Bucketing that column into “investment grade” and “below” means taking two possible readings, picking one, and publishing a number a buyer will act on. So DealWise does not bucket it, does not order it, and does not compute an investment-grade share from it. It reports the shares verbatim, by whatever string is on the row, and lets you apply your own scale. Agency ratings and internal grades roll up separately, each summing to its own 100%.
Less convenient than a single headline number, and the only version that is not occasionally a fabricated credit opinion.
What DealWise does with this
Three states, not two
Stated, none-stated and unknown are three different facts. Collapsing the third is what makes a rent roll overstate its own credit.
Weighted by rent
Every share is a share of in-place base rent, never of suite count — because income is what a covenant stands behind.
The unstated share is first-class
Reported beside the bands with the same weighting, not buried under them.
Verbatim text kept
The guaranty language travels beside the number, so a reader who disagrees with the reading can see what produced it.
Forms are not merged
A franchisee guaranty and a full corporate guaranty are both 'stated' and are not the same covenant, so they stay separate.
Scales are not mixed
Agency ratings and internal grades roll up separately, each to its own 100%, because the same letter means different things on each.
Frequently asked questions
What is a commercial lease guaranty?
A promise by someone other than the tenant to perform the tenant's obligations if the tenant does not. It is a separate covenant from the lease itself, which is why a lease can be sound and its guaranty worthless, or the reverse. What the guaranty is worth depends entirely on who gave it and what it covers.
What is the difference between a personal and a corporate guaranty?
A personal guaranty is given by an individual and reaches their own assets. A corporate guaranty is given by an entity — typically a parent or affiliate of the tenant — and reaches only that entity's assets. A corporate guaranty from a well-capitalized parent is usually worth far more than a personal one; a corporate guaranty from a shell with no assets is worth nothing at all, and both look identical in a rent roll column.
What is a good guy guaranty?
A limited personal guaranty, common in New York, under which the individual is liable for rent only until the tenant vacates and hands back the space in the agreed condition. It does not guarantee the full remaining term. Its purpose is to make sure the landlord gets the space back promptly and clean rather than fighting a holdover, so it buys surrender, not rent.
Is a franchisee guaranty the same as a brand guaranty?
No, and conflating them is one of the more expensive mistakes in retail underwriting. A guaranty from the franchisee is the franchisee's covenant — typically one operator with a handful of locations — not the national brand's. The sign over the door is the brand's; the money behind the lease is not.
How should a rent roll treat a blank guarantor column?
As unknown, never as 'no guaranty'. They are different facts. An empty column means nobody has checked; a lease that states there is no guaranty means somebody checked and the answer was no. Booking the first as the second prints an affirmative claim the document never made, and booking it as a guaranty credits a covenant that may not exist.
Should tenant credit be weighted by suite count or by rent?
By rent. The question is not how many tenants are rated, it is how much of the income sits behind a covenant you trust. One 40,000 SF graded anchor plus six small unrated tenants is a completely different building from the reverse, and a suite count reports the two as identical.
Can you compare an internal credit grade to an S&P rating?
Not safely, and the letters make it look like you can. On an internal A/B/C/D scale a 'B' is second best of four. On an agency scale it is deep speculative grade. If a rent roll's credit column mixes internal grades with agency notation — which happens whenever one dropdown collected both, as ours once did — then bucketing it into 'investment grade' and 'below' means picking one reading and publishing a number somebody will act on.
What does an unstated share tell you?
Usually more than the stated one. A rollup reporting '100% investment grade' off the two suites that happen to be graded, while saying nothing about the other nine, is worse than no rollup — it converts silence into a covenant. The share of rent behind nothing recorded should be read before any of the bands.
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The guaranty is in the lease. It should not be in a spreadsheet nobody trusts.
DealWise AI reads your leases, pulls the guarantor language out of each one, and rolls it up weighted by rent — with the unstated share shown beside the rest and the original wording kept next to every number.