The Continuing Guaranty Trap: Why Old Promises Haunt New Deals

Personal guaranties are powerful tools for landlords and lenders. They’re also one of the most misunderstood obligations in business contracts. Many tenants and business owners believe that once they assign a lease or move on from a deal, their guaranty obligations vanish. The reality? Unless the guaranty is expressly released, those obligations can continue—and come back years later.

A Real Case From My Practice

I represent a landlord in a commercial lease dispute. The original tenant signed with a personal guaranty. Later, the tenant assigned the lease—with the landlord’s permission—to a new tenant. But here’s the catch: the original guaranty was never discharged. When the new tenant defaulted, the landlord pursued the new tenant, the new tenant’s guarantor, and the original guarantor. The original tenant assumed their guaranty ended with the assignment. It didn’t. That “continuing guaranty” is enforceable.

What Is a Continuing Guaranty?

A continuing guaranty is a promise that extends beyond one transaction. Instead of covering just the original lease term or debt, it applies to renewals, extensions, assignments, or even future obligations—unless it specifically says otherwise. In practice, it can make you liable long after you thought you walked away.

Why They’re Risky

• No Expiration: Obligations continue until expressly revoked or released in writing.
• Applies to New Deals: Extensions, modifications, or assignments can all trigger the guaranty.
• Multiple Liabilities: Both old and new guarantors can be pursued together.
• Surprise Exposure: Business owners who moved on years ago suddenly face claims for someone else’s default.

How to Protect Yourself

• Negotiate Limits: Make the guaranty tied only to the original lease term or obligation.
• Require Written Release: If assigning or exiting a deal, insist on a formal release of your guaranty.
• Watch Renewal Language: Strike provisions that extend the guaranty into renewals or modifications without consent.
• Seek Legal Review: Even “boilerplate” guaranty forms can carry hidden continuing obligations.

Don’t Let Old Obligations Haunt You

At JDE Law Firm, PLLC, I’ve seen too many business owners blindsided by guaranties they thought had expired. Whether you’re signing a lease, assigning one, or enforcing a guaranty, it’s critical to know when obligations truly end—and when they don’t.

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