Personal Guarantee Information
Personal guarantees are commonly required when: a new business entity signs a commercial lease (the landlord requires the owner's personal guarantee because the entity has no track record), a small business obtains a commercial mortgage or line of credit (the lender requires the principal's guarantee), and a construction company enters a general contract (the owner requires the contractor's personal guarantee for completion). The personal guarantee transforms the entity's limited liability into unlimited personal liability for the guarantor. The guarantor's personal assets (home, savings, investments, vehicles) become available to satisfy the guaranteed obligation if the entity defaults.
Florida Legal Definition
Personal guarantees in Florida are governed by general contract law. The guarantee must be in writing to be enforceable under the Statute of Frauds (§725.01). Florida's homestead exemption (Article X, Section 4) protects the guarantor's primary residence from creditor claims arising from the guarantee (except for mortgages on the homestead itself). Under Florida Statutes §55.10, a judgment against the guarantor creates a lien on the guarantor's non-exempt real property. The creditor must first exhaust remedies against the primary debtor (the entity) before pursuing the guarantor, unless the guarantee contains a waiver of this requirement (which most guarantees do).
How It's Used in Practice
In practice, attorneys negotiate personal guarantees for both guarantors and creditors. For guarantors, the attorney negotiates: a cap on the guaranteed amount (limiting exposure to a specific dollar amount rather than the full obligation), a burn-off provision (reducing the guaranteed amount over time as the entity builds a payment history), specific performance triggers (clearly defining when the guarantee can be enforced), carve-outs for the guarantor's homestead property, and time limits (the guarantee expires after a specified period). For creditors (landlords, lenders), the attorney drafts guarantees that: waive the requirement to exhaust remedies against the entity first, include joint and several liability (if multiple guarantors), cover all obligations including late fees, attorney's fees, and collection costs, and survive the termination of the underlying obligation.
Key Takeaways
- Personal guarantees make individuals liable for entity obligations.
- Must be in writing under the Statute of Frauds.
- Florida homestead exemption protects the guarantor's primary residence.
- Negotiate: caps, burn-off provisions, and specific performance triggers.
- Most guarantees waive the requirement to pursue the entity first.
Disclaimer: The information and opinions provided are for general educational, informational or entertainment purposes only and should not be construed as legal advice or a substitute for consultation with a qualified attorney. Any information that you read does not create an attorney–client relationship with Barnes Walker, Goethe, Perron, Shea & Johnson, PLLC, or any of its attorneys. Because laws, regulations, and court interpretations may change over time, the definitions and explanations provided here may not reflect the most current legal standards. The application of law varies depending on your particular facts and jurisdiction. For advice regarding your specific situation, please contact one of our Florida attorneys for personalized guidance.
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