How Do I Get a Personal-Guarantee Burn-Down Schedule?

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What a Personal Guarantee Actually Costs You

A full personal guarantee means the lease is no longer a corporate risk — it is your risk. If the business fails in year three, the landlord can sue you personally for the remaining four years of rent plus interest and costs. That is the entire purpose of the PG: it pierces the corporate veil that you formed an LLC to create in the first place. Many founders sign it without reading because the landlord frames it as routine, and only discover the exposure when the business stumbles.

Know the four common structures so you can name the one you want:

• Unlimited PG: full remaining rent, no cap. This is the worst case and the landlord's opening ask.
• Capped PG: liability limited to a fixed dollar figure, often 12 months' rent.
• Burn-down PG: capped and declining over time as you pay — the structure to fight for.
• Good-guy guarantee: you are liable only until you vacate and return the keys properly, common in many urban office and retail markets.

How a Burn-Down Schedule Works

A typical burn-down on a seven-year lease moves like this. In months 0–12, your liability is capped at 12 months' rent, roughly $350,000. At the start of year two, the cap drops to 8 months, about $233,000. By year three, it falls to 4 months, around $117,000. At the end of year three, it burns to $0 and you carry only corporate liability from that point forward.

The reduction is conditional on clean payment. Miss your rent or fall into default and the PG snaps back to the full cap. That is a fair trade — the landlord is being compensated for de-risking your early, fragile years, and you are being rewarded for proving you pay. The whole structure rewards the behavior both sides want.

How to Negotiate the Burn-Down

• Open with no PG at all. If your company has two or more years of profitable operating history, argue for a corporate-only lease backed by a modest security deposit instead of any personal guarantee.
• Counter the full-term ask with a burn-down. Frame it plainly: "I will guarantee the risky early years; after I have proven payment, the company stands on its own." Landlords find this reasonable because it matches their actual risk curve.
• Set the starting cap at 6–12 months, never the full remaining term.
• Tie the reduction to clean payment, and define "default" narrowly so that only a real monetary default beyond a cure period resets the guarantee — not a technical or paperwork breach.
• Add a good-guy clause so that if you surrender the space properly, your liability for future rent stops even before the burn-down schedule completes.

Strengthen Your Position Before You Ask

Landlords size the guarantee to the risk they perceive, so lower the risk and you lower the guarantee. Each of these levers gives the landlord comfort and gives you a shorter PG in return.

• Offer a larger security deposit — three to four months — in exchange for a shorter personal guarantee.
• Provide real financials showing revenue, runway, and margins. A demonstrably profitable company earns a shorter PG, or none at all.
• Offer a letter of credit instead of a personal guarantee. It caps the landlord's downside without ever touching your personal home or savings.
• Trade term for a shorter PG. A longer lease gives the landlord the stability they want, so they will often accept a faster burn-down in exchange for the extra years.

Red Flags to Strike

Before you sign, hunt down and remove these clauses, each of which quietly expands your personal exposure beyond what you agreed to:

• "Joint and several" PG across multiple owners — each owner can be held liable for 100% of the obligation. Push for several-only or pro-rata liability instead.
• PG covers all costs, not just rent — limit it strictly to base rent, and exclude consequential damages and the landlord's claimed lost profit.
• No cure period before reset — demand at least a 10-business-day cure before any default resets the burn-down to full.
• Spouse signature required — refuse it. Keep marital and separate assets out of the guarantee unless a lender legally forces the issue.

What a Typical Burn-Down Schedule Looks Like in Practice

A well-structured burn-down schedule isn’t a one-size-fits-all document — it’s a negotiated timeline that aligns your personal exposure with your business’s growing stability. Most commercial landlords will accept a 24- to 36-month burn-down period, though some aggressive negotiators can push for 18 months if the tenant has strong cash flow or a proven track record in similar spaces.

Here’s a realistic example for a 5-year lease with a burn-down schedule:

The key detail: the burn-down should be automatic, not discretionary. You don’t want a clause that says “landlord may reduce guarantee at its sole discretion” — that’s a trap. Instead, insist on language like “guarantee shall automatically reduce by X% on each anniversary date provided no uncured payment default exists.”

Also watch for partial burn-downs that only cover base rent but not operating expenses or taxes. A savvy landlord might offer a “50% burn-down” that actually only applies to the fixed rent portion, leaving you personally liable for all variable costs (which can spike 5–10% annually). Always get the burn-down applied to total rent obligations, not just base rent.

How to Frame the Negotiation with Your Landlord

Landlords aren’t in the business of giving away protection — they want to feel secure that you won’t walk away mid-lease. The best way to win a burn-down schedule is to frame it as a shared incentive, not a concession.

Start your conversation like this: *“We want to be here for the full term and grow our business in this space. A burn-down schedule aligns our interests — it gives you a strong guarantee early on while we prove ourselves, and it rewards us for being a reliable tenant.”*

This works because it acknowledges the landlord’s risk while offering a clear path to reduced exposure. Most landlords will be more receptive when they see you’re not trying to dodge liability entirely — you’re just asking for a fair reduction over time.

Key negotiating points to prepare:

• Offer a higher base rent or shorter initial term in exchange for a faster burn-down. Landlords often trade guarantee terms for rent certainty.
• Propose a “good payer” clause — if you pay rent on time for 12 consecutive months, the guarantee automatically drops by a set percentage. This makes the burn-down feel earned, not given.
• Use your business financials — if your company has 2+ years of tax returns showing consistent revenue or profitability, present that as evidence that the PG is a safety net, not a necessity.
• Consider a “springing” guarantee as a fallback — if your business defaults, the personal guarantee kicks in retroactively. This is weaker than a burn-down but better than a full-term PG.

A common mistake is asking for a burn-down too late in the lease negotiation. Bring it up during the initial letter of intent (LOI) stage, not after the lease draft is already written. Once the landlord’s attorney has spent hours drafting a full-term guarantee, they’ll resist changes. Get it in the LOI as a non-negotiable term.

What Happens If You Miss a Payment During the Burn-Down Period

Even with a well-negotiated burn-down schedule, life happens — a slow-paying client, an unexpected expense, or a billing error can cause a late payment. How this affects your personal guarantee depends entirely on the cure period and reinstatement language in your lease.

Most burn-down schedules include a 30-day cure period for payment defaults. If you pay within that window, the burn-down continues as scheduled — no reset, no penalty. But if you miss the cure period entirely, the landlord may have the right to reinstate the full personal guarantee for the remaining lease term. This is called a “reinstatement clause,” and it’s brutal if you don’t catch it.

What to watch for in the fine print:

• Automatic reinstatement — some leases say the PG jumps back to 100% immediately upon any default, even if cured. Negotiate this to say “only if default remains uncured after notice and cure period.”
• Partial reinstatement — a better option is a clause that reinstates only the portion of the guarantee that had burned down. For example, if you’re at 50% exposure and miss a payment, you go back to 80%, not 100%.
• One-time forgiveness — ask for a “one-time reset” provision that allows a single late payment (with a 10-day grace period) without triggering reinstatement. Landlords often agree to this for tenants with strong payment histories.

Real-world example: A tenant with a 36-month burn-down schedule missed a rent payment in month 18 due to a bank processing error. Because their lease had a 15-day cure period and the error was corrected in 10 days, the burn-down continued uninterrupted. Had the lease lacked that cure period, their personal guarantee would have snapped back to 100% for the remaining 42 months — an extra $300,000+ of personal exposure.

The takeaway: always confirm the cure period is at least 15–30 days, and push for language that prevents automatic reinstatement for minor, quickly cured defaults. A good burn-down schedule protects you not just from the guarantee itself, but from the traps that could bring it back.

FAQ

What exactly is a personal-guarantee burn-down schedule? It’s a clause in your lease that gradually reduces your personal liability for the lease’s obligations as your business makes on-time payments. Typically, the guarantee shrinks by a fixed percentage each month or quarter, reaching zero after 24 to 36 months of clean payment history.

How do I start negotiating a burn-down with my landlord? Bring it up early, during the letter of intent stage, before you sign the lease. Frame it as a win-win: you get liability relief, and the landlord gets proof of your reliability through consistent payments. Most landlords will consider it if your company has a solid payment track record or strong financials.

What’s a realistic burn-down timeline to ask for? A 24-month schedule is common for established tenants, while startups or riskier businesses might need to push for 36 months. Anything shorter than 12 months is rare unless you have exceptional credit or a large security deposit.

Can I get a burn-down if my business is new or has weak credit? Yes, but you may need to offer a larger security deposit, a shorter initial guarantee period, or a personal guarantee that only covers a percentage of the rent (like 50%) from the start. Landlords often accept a phased approach if you show strong personal assets or a co-signer.

What happens if I miss a payment during the burn-down period? The burn-down typically pauses or resets — your personal liability stays at its current level until you catch up. Some leases require you to restart the entire schedule from the beginning after a default, so read the fine print carefully.

Is a burn-down the same as a guarantee cap? No. A cap limits your personal liability to a fixed dollar amount (e.g., six months’ rent), while a burn-down reduces it over time to zero. Both are good protections, but a burn-down is usually better because it eliminates liability entirely if you pay on time.

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Sources

• CBRE, "Tenant Representation: Lease Guarantee and Credit Structures."
• JLL, "Office Leasing — Personal Guarantee and Security Deposit Benchmarks."
• Cushman & Wakefield, "Tenant Advisory: Negotiating Guarantees and Letters of Credit."
• NAIOP — commercial lease guarantee structuring and burn-down norms.
• BOMA International — leasing risk and security standards.
• The Tenant Advisor — good-guy guarantee and burn-down negotiation guidance.

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