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What are the typical terms for a Lease Guaranty?

Table of Contents

  1. Introduction

  2. Typical Terms for a Lease Guaranty 2.1. Guarantor's Obligations 2.2. Default by the Lessee 2.3. Notice and Demand 2.4. Remedies of the Guarantor 2.5. Indemnification 2.6. Termination 2.7. Governing Law and Jurisdiction

  3. Conclusion

Introduction

This response will address the typical terms found in a Lease Guaranty agreement in Kenya. A Lease Guaranty is a legally binding agreement where a third party, known as the Guarantor, agrees to be responsible for the obligations of the Lessee under a lease agreement. This is often used when the Lessee is a company or individual with limited financial resources or a history of financial instability.

Typical Terms for a Lease Guaranty

2.1. Guarantor's Obligations

  • Guarantor's Promise to Pay: The Guarantor explicitly promises to pay the rent and other obligations of the Lessee under the lease agreement if the Lessee fails to do so. This is the core of the Guaranty agreement.

  • Scope of Guaranty: The Guaranty agreement should clearly define the scope of the Guarantor's obligations. This includes specifying the specific obligations covered, such as rent, utilities, property taxes, and any other charges.

  • Duration of Guaranty: The Guaranty agreement should specify the duration of the Guarantor's liability. This could be for the entire term of the lease or for a specific period.

2.2. Default by the Lessee

  • Definition of Default: The Guaranty agreement should clearly define what constitutes a default by the Lessee. This could include failure to pay rent, breach of lease terms, or any other event that triggers the Guarantor's liability.

  • Notice of Default: The Guarantor should be notified of any default by the Lessee. This notice should be in writing and should provide details of the default.

2.3. Notice and Demand

  • Demand for Payment: The Landlord should provide the Guarantor with a written demand for payment of the Lessee's outstanding obligations. This demand should specify the amount owed and the deadline for payment.

  • Time for Payment: The Guarantor should be given a reasonable time to fulfill their obligations after receiving the demand for payment. This time period should be clearly stated in the Guaranty agreement.

2.4. Remedies of the Guarantor

  • Right to Cure Default: The Guarantor may have the right to cure the Lessee's default by paying the outstanding obligations. This right should be clearly stated in the Guaranty agreement.

  • Right to Subrogation: The Guarantor may have the right to subrogation, which allows them to step into the Landlord's shoes and pursue the Lessee for the amounts they paid.

2.5. Indemnification

  • Indemnification Clause: The Guaranty agreement may include an indemnification clause, where the Guarantor agrees to indemnify the Landlord for any losses or expenses incurred due to the Lessee's default.

2.6. Termination

  • Termination of Guaranty: The Guaranty agreement should specify the conditions under which the Guarantor's liability can be terminated. This could include the Lessee's full performance of their obligations under the lease or the expiration of the Guaranty period.

2.7. Governing Law and Jurisdiction

  • Governing Law: The Guaranty agreement should specify the governing law that will be applied to the agreement. This is typically Kenyan law.

  • Jurisdiction: The Guaranty agreement should specify the jurisdiction where any disputes arising from the agreement will be resolved. This is typically the Kenyan courts.

Conclusion

The terms of a Lease Guaranty agreement are crucial for both the Landlord and the Guarantor. The agreement should clearly define the obligations of the Guarantor, the conditions for triggering their liability, and the remedies available to both parties. It is essential to have a well-drafted Guaranty agreement that protects the interests of all parties involved.

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