- A personal guarantee is a separate contract between you and the landlord — a promise that you’ll cover the tenant’s obligations if the tenant doesn’t.
- From a landlord’s perspective, an existing personal guarantee from an owner who built and understands the business is often more valuable than an unknown, unproven buyer’s promise to pay.
- Raise it early, before you sign the assignment consent, not after.
If you personally guaranteed your business’s commercial lease when you signed it, selling the business doesn’t automatically make that guarantee disappear, even once the lease has been formally assigned to your buyer. Many sellers assume that once the landlord consents to the assignment, their personal exposure ends with it. That assumption can be expensive to get wrong.
This article explains why a personal guarantee generally survives a lease assignment unless it’s specifically addressed, and how to negotiate an actual release before you close your sale.
The General Rule: Assignment Doesn’t Automatically End Your Guarantee
A personal guarantee is a separate contract between you and the landlord — a promise that you’ll cover the tenant’s obligations if the tenant doesn’t. Assigning the lease changes who the tenant is; it doesn’t, by itself, change or end a separate guarantee contract you signed. Unless the guarantee document itself says it ends on assignment, or the landlord agrees in writing to release you, your personal guarantee can keep running in the background long after you’ve sold the business and handed over the keys.
This matters because landlords generally have to consent to an assignment of the lease — and under Ontario’s Commercial Tenancies Act, that consent generally can’t be unreasonably withheld where the lease is silent on the point. But consenting to let a new tenant take over the lease is a completely different question from agreeing to let the old guarantor off the hook, and landlords know it.
Why Landlords Want to Keep the Original Guarantee
From a landlord’s perspective, an existing personal guarantee from an owner who built and understands the business is often more valuable than an unknown, unproven buyer’s promise to pay. Landlords have no legal obligation to release a seller’s guarantee just because the business is changing hands, and many will happily let a guarantee continue indefinitely unless the seller specifically negotiates its end — it costs the landlord nothing and gives them an extra layer of security.
Negotiating an Actual Release
- Raise it early, before you sign the assignment consent, not after. Once the landlord has already consented and the deal has closed, you have far less leverage to ask for anything more.
- Ask for the release in writing, as a specific condition of your consent to the assignment, not as something you assume is implied.
- Offer the landlord something in its place, if needed — commonly, requiring the buyer (or the buyer’s own principals) to provide a new personal guarantee as a condition of the assignment.
- Consider a time-limited or declining guarantee as a middle ground if the landlord won’t agree to a full, immediate release — for example, your guarantee stepping down or ending after a defined period of the buyer’s good performance, if the landlord will agree to that structure.
- Get the release itself in a signed document, not just a verbal assurance from the landlord or a general assumption drawn from the consent letter — vague wording is exactly where later disputes come from.
Guarantee Continues vs. Guarantee Released
| Guarantee Continues | Guarantee Released | |
|---|---|---|
| Who is on the hook if the buyer defaults on rent | You (the seller), potentially for the remaining lease term | The buyer and any guarantor the buyer provides, not you |
| What triggers this outcome | Landlord consents to assignment without addressing the guarantee | Landlord agrees, in writing, to release you as part of the consent |
| When to address it | — | Before the assignment consent is signed, not after |
| Common landlord ask in exchange | — | A new guarantee from the buyer or the buyer’s principals |
Frequently asked questions
If the landlord consents to the assignment, doesn’t that automatically release me?
Not unless the consent document specifically says so. A landlord can consent to a new tenant taking over the lease while still holding the original guarantor responsible — these are two separate things, addressed in the same document only if you make sure they are.
What if my original lease or guarantee is silent on what happens after an assignment?
Silence generally favours the landlord — without express release language, a guarantee has generally been treated as continuing to apply to the assigned lease unless the guarantee document or a separate release says otherwise. This is exactly why it needs to be addressed explicitly at the time of assignment.
Can I negotiate a release after closing, if I forgot to raise it before?
It’s much harder. Your leverage to negotiate anything with the landlord is highest before you’ve completed the assignment and the deal has closed. After that, the landlord has little incentive to give up a guarantee it’s already holding for free.
Does this apply if the sale is structured as a share sale instead of an asset sale?
Generally not in the same way, since the corporate tenant itself doesn’t change in a share sale and the lease usually isn’t being assigned at all — but if your personal guarantee was tied to specific individuals remaining involved in the business, it’s still worth checking the guarantee’s exact wording against the new ownership structure.
This is a business purchase or sale question
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