The Leasing Hotline

PERSONAL GUARANTY

Where issues of fact exist surrounding a personal guaranty, the tenant will not be granted a motion to dismiss; a tenant is not absolved of liability merely because a landlord relets the premises if the landlord is not made whole by the reletting. Old 875 LLC & New 875 LLC v. Andrew Cantor, Civil Action No. 04-CV-4154, U.S. District Court for the Eastern District of Pennsylvania, Jan. 4, 2005.

The landlord and tenant entered into a lease for commercial space, and the tenant executed a personal guaranty for all obligations under the lease. Subsequently, the parties amended the lease, and the tenant agreed personally to guaranty the performance of all obligations under the amendment. The tenant defaulted on the lease and the amendment, and surrendered the premises. The landlord commenced a diversity action against the tenant, claiming that the tenant, as guarantor, was liable for all damages the landlord sustained as a result of the default. The tenant moved to dismiss, arguing that the guaranty applied only to the payment of rent before the surrender of the premises. It could not apply to the damages sought by the landlord because the tenant surrendered the property, thereby voiding any additional duty on his part as guarantor. The district court denied the motion on the grounds that the language of the guaranty stated that a surrender of the premises could not occur if the tenant was in breach of the terms of the lease agreement. The court further held that the tenant was not absolved of liability merely because the landlord relet the premises, where the landlord was not made whole by the reletting.