Keep Track of Guarantor's Creditworthiness

Keep track of the creditworthiness of a tenant's guarantor, and of any bankruptcy proceeding filed by or against it, advises New Jersey attorney Marc L. Ripp. You'll need this information to determine if you're entitled to request alternative security from the tenant—provided, of course, that your lease gives you a right to such alternative security, he says.

To keep track of a guarantor's creditworthiness, make sure the guaranty requires the guarantor to give you a detailed and accurate financial statement whenever you ask for one, suggests Ripp. Then make sure you periodically ask for a financial statement, because the guarantor's creditworthiness could drop quickly, he says. Also make sure the guaranty requires the guarantor to promptly send you notice of any bankruptcy proceeding filed by or against it, Ripp adds. And make sure the lease requires the tenant to notify you immediately if the guarantor dies or dissolves, he notes.

CLLI Sources

Marc L. Ripp, Esq.: Counsel, The Gale Co., LLC, 100 Campus Dr., Ste. 200, Florham Park, NJ 07932-1007; (973) 301-9500; mripp@thegale company.com.