How Do I Get a Personal-Guarantee Burn-Down Schedule?
<svg xmlns="https://www.w3.org/2000/svg" viewBox="0 0 1200 340" role="img" aria-label="How Do I Get a Personal-Guarantee Burn-Down Schedule? — PULSE Buildouts"><rect width="1200" height="340" fill="#EBE9DE"/><rect width="14" height="340" fill="#C0531F"/><text x="58" y="116" font-family="Arial,Helvetica,sans-serif" font-size="32" font-weight="800" letter-spacing="3" fill="#C0531F">PULSE BUILDOUTS · COMMERCIAL REAL ESTATE</text><text x="56" y="198" font-family="Arial,Helvetica,sans-serif" font-size="60" font-weight="800" fill="#2b2b2b">Save money. Don’t get screwed.</text><text x="58" y="258" font-family="Arial,Helvetica,sans-serif" font-size="30" font-weight="600" fill="#6b5b4d">Leases, TI, NNN & buildouts — negotiated in your favor</text><g transform="translate(1010,86)" fill="none" stroke="#C0531F" stroke-width="9" stroke-linejoin="round"><rect x="20" y="40" width="150" height="130"/><line x1="20" y1="40" x2="95" y2="6"/><line x1="170" y1="40" x2="95" y2="6"/><rect x="50" y="80" width="36" height="36"/><rect x="104" y="80" width="36" height="36"/><rect x="74" y="128" width="42" height="42"/></g></svg>
The money move: never sign a full-term, unlimited personal guarantee — demand a burn-down that shrinks your personal liability to zero over 24–36 months of good payment. Landlords ask for a personal guarantee (PG) when your company lacks the credit history or balance sheet to stand on its own. Their default ask is a full-term guarantee: you are personally on the hook for every dollar of rent for the entire 7- or 10-year lease. On a 10,000 SF deal at $35/SF, that is $350,000 a year of personal exposure — your house, your savings, and your kids' college fund all riding on a lease that outlasts most businesses.
The fix is a burn-down (or "rolling") guarantee, where your personal liability declines on a fixed schedule as long as you pay on time. A strong burn-down caps exposure at 6–12 months of rent up front, then reduces by one-third or one-half each year, hitting $0 after 24–36 months. The landlord still gets real protection during the risky early years when most tenants fail; you stop betting your personal net worth on year seven of a deal you cannot predict. Ask for it at the LOI — it is a standard, well-understood structure, and landlords grant it routinely to tenants who push for it.
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.
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What a Good Burn-Down Schedule Looks Like in Practice
A well-structured burn-down schedule isn't a single cliff — it's a series of small, predictable steps that reduce your personal exposure as your business proves its reliability. The most common structure is a three-phase burn-down:
- Year 1: Full personal guarantee (100% of remaining lease obligations)
- Year 2: Drops to 50–60% of remaining obligations
- Year 3: Falls to 20–30%
- Year 4+: Zero personal exposure (or a nominal cap, like 3 months' rent)
For a 10-year, $350K/year lease, that means your personal risk goes from ~$3.5M (full term) down to roughly $175K in Year 2, then $70K in Year 3, and finally $0 by Year 4. Some landlords will push for a "tail" — a small residual guarantee (e.g., 6 months' rent) that never burns off — but you should aim to eliminate that entirely.
The key negotiating lever: tie each burn-down step to a clean payment record (no defaults, no late payments beyond a 10-day grace period). This gives the landlord a clear, objective trigger to reduce your exposure, not a vague "we'll review it later" promise.
How to Negotiate the Burn-Down Timeline
Landlords will initially resist a fast burn-down — they want maximum coverage for as long as possible. Your counter is to offer a shorter initial guarantee period in exchange for a faster burn. Here's the playbook:
- Start with a 12-month "hard" guarantee — you're personally liable for everything in Year 1. This gives the landlord comfort that you'll actually pay rent while your business stabilizes.
- Propose a 24-month burn-down after that: 50% in Year 2, 25% in Year 3, 0% by Year 4. Frame it as "I'll show you I'm good for it, then you let me off the hook."
- If they push back, offer a "step-down" instead — your guarantee drops by 10% every 6 months (e.g., 100% → 90% → 80% → 70%...). This is slower but still eliminates 100% exposure within 4–5 years.
The most common landlord counter is a "linear burn" — 10% per year for 10 years. That leaves you personally exposed for the entire lease term (just at a lower dollar amount). Reject this: it defeats the purpose of a burn-down. Instead, insist on a front-loaded reduction (50%+ gone in the first 3 years).
What Happens If You Miss a Payment During the Burn-Down
A critical detail most tenants overlook: what happens to the burn-down schedule if you're late on rent? Landlords will often include a "reinstatement" clause — if you miss a payment, the personal guarantee snaps back to 100% for the remaining lease term. This is a trap.
Negotiate for a cure period (typically 30 days) before any reinstatement kicks in, and make sure the burn-down only resets to the *current* level (not the original 100%). For example:
- You're in Year 3, with 25% guarantee remaining
- You miss a payment, but cure within 30 days
- Your guarantee stays at 25% — it doesn't jump back to 100%
Also, define "default" narrowly: only uncured monetary defaults (missed rent after notice) should trigger reinstatement, not technical defaults like a late financial statement. This protects you from losing your burn-down progress over minor paperwork issues.
FAQ
What exactly is a personal-guarantee burn-down schedule? It’s a clause that gradually reduces your personal liability on a commercial lease 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 negotiate a burn-down schedule with a landlord? Start by asking for it during lease negotiations, not after signing. Frame it as a reward for consistent rent payment — most landlords will consider a 24- to 36-month burn-down if your business has solid financials or you offer a short initial guarantee period.
What’s a typical burn-down timeline? Common schedules range from 24 to 36 months, with liability decreasing in equal increments. For example, a 36-month schedule might reduce your guarantee by roughly 2.8% each month, hitting zero at the end. Shorter timelines are harder to get unless you have strong credit or a larger security deposit.
Can I get a burn-down if my company is a startup? Yes, but it’s tougher — landlords may require a shorter burn-down (e.g., 18 to 24 months) or a higher security deposit. You might also need to show personal financial strength or a co-signer to start the negotiation.
What happens if I miss a payment during the burn-down? Most schedules pause or reset if you miss a payment. For instance, a 30-day late payment could freeze the burn-down until you catch up, and repeated misses might restart the clock. Always check the specific terms — some landlords allow a one-time grace period.
Is a burn-down schedule the same as a personal-guarantee release? No — a release ends your liability at a set date (e.g., after 24 months of payments), while a burn-down gradually reduces it over time. Burn-downs are more common because they give landlords ongoing protection if your business struggles early on.
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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