RBizz Corporate Accountants - Resources #director personal liabilityRBizz Corporate Accountants - Resources #director personal liabilityhttps://www.rbizz.com.au/blogs/tag/director-personal-liabilityFri, 21 Aug 2026 19:05:44 +1000http://zoho.com/sites/<![CDATA[Personal Guarantees: What Directors Actually Sign Away When Leasing Commercial Premises]]>https://www.rbizz.com.au/blogs/post/personal-guarantees-what-directors-actually-sign-away-when-leasing-commercial-premisesA company lease doesn't protect a director personally once a landlord requires a personal guarantee, and the scope often extends well beyond rent — covering make-good costs, option periods, and holding over, with liability that doesn't end just because the director resigns.]]>
Personal Guarantees: What Directors Actually Sign Away When Leasing Commercial Premises

Personal Guarantees: What Directors Actually Sign Away When Leasing Commercial Premises

A company entering a commercial lease is generally protected by limited liability — if the business fails, the landlord's claim is against the company, not the individuals behind it. Landlords know this, which is exactly why commercial leases for smaller or newer companies routinely require a director's personal guarantee as a condition of the lease. Once signed, that guarantee steps entirely outside the protection the company structure otherwise provides, and many directors sign these without fully appreciating the scope of what they've actually agreed to.

What a Personal Guarantee Actually Does

A personal guarantee is a separate legal undertaking, given by an individual (typically a director or shareholder), promising to personally cover the company's obligations under the lease if the company fails to meet them. This isn't a formality — it's a direct, personal financial exposure that exists entirely independently of the company's own liability.

If the company can't pay rent, breaches the lease, or the lease is terminated early with outstanding obligations, the landlord can pursue the guarantor personally for the shortfall — potentially including remaining rent for the balance of the lease term, make-good costs, and other losses arising from the breach.

Where Directors Commonly Underestimate the Exposure

The guarantee often covers more than just rent. Many personal guarantees extend to the company's full performance of the lease — including outgoings, make-good obligations at the end of the tenancy, and damages arising from early termination — not simply the monthly rent figure a director might have mentally calculated as "the risk."

The guarantee can extend well beyond the initial lease term. If a lease includes an option to renew, or the company holds over after the lease expires, the personal guarantee may continue to apply during that extended period, depending on how it's drafted — meaning a guarantee signed years earlier can still be live long after the original lease term the director had in mind.


Guarantees don't automatically end when a director leaves the company. A director who resigns, sells their shares, or steps back from the business doesn't automatically release their personal guarantee obligations under an existing lease — the guarantee generally continues until the lease itself ends or the landlord specifically agrees to release the guarantor.


Joint and several liability is common with multiple guarantors. Where more than one director provides a guarantee, this is typically structured as "joint and several," meaning the landlord can pursue any one guarantor for the full amount owed, not just their proportional share — leaving that individual to separately seek contribution from the other guarantors if they can.

What to Check Before Signing a Personal Guarantee

  • Read the guarantee's actual scope, not just the headline rent figure — confirm whether it covers outgoings, make-good costs, and damages for early termination, not just monthly rent.
  • Check whether the guarantee extends to option periods or holding over, since this can significantly extend your personal exposure beyond what feels like "the lease term."
  • Understand that resignation or exit from the company doesn't automatically release you, and specifically negotiate a release mechanism if you're likely to exit the business before the lease ends.
  • Clarify the liability structure if multiple guarantors are involved, since joint and several liability means you could be pursued for the full amount, not just your expected share.
  • Consider negotiating a cap or a reducing guarantee, where the guaranteed amount decreases over time as the company demonstrates a track record of meeting its lease obligations — this is a genuinely negotiable point in many commercial lease discussions, not a fixed landlord requirement.

    • Guarantees Are Negotiable More Often Than Directors Assume

    Many directors treat a landlord's request for a personal guarantee as a non-negotiable condition of the lease. In practice, the scope, duration, and cap of a guarantee are often genuinely negotiable — particularly for an established business, a longer lease term, or where a bank guarantee or larger security deposit might be offered as an alternative to an uncapped personal guarantee.

    Understand Exactly What You're Signing

    Before signing a personal guarantee for a commercial lease, it's worth having the specific document reviewed — not just the headline lease terms — to understand the actual scope, duration, and structure of the personal exposure being created.

    RBizz can connect you with commercial lawyers to review lease terms and personal guarantee exposure before you sign — get in touch before your next lease negotiation.

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