Personal Guaranties: Don't Overestimate the Simplicity of this Instrument

Commercial lenders and landlords are more often looking to borrowers and tenants to sign personal guaranties. A personal guaranty is a legal and binding promise to pay the debt of another person or entity should that person or entity default on the primary obligation. In other words, the individual who signs the personal guaranty will be liable for the debt and payments obligations as if he or she signed the promissory note or lease him/herself.  If you are considering signing a personal guaranty, you should consult one of our Lynnfield corporate attorneys or real estate attorneys to advise you on the various risks and benefits associated with the guaranty.

Guaranties are typically not included in a promissory note or lease agreement itself. Guaranties are contained in separate documents, as notes and leases alone are typically insufficient to create a binding obligation. There are numerous valid defenses to guaranties, which means that if you ever have to enforce a guaranty by commencing litigation against a guarantor, a skilled attorney will be able to uncover flaws that support legal defenses to the guaranty. This means that if the guaranty is not properly (and near perfectly) drafted, then a guarantor may have the opportunity to demonstrate that the guaranty is unenforcable and avoid payment of the debt. If you have questions and concerns about drafting or reviewing a guaranty for enforcability, please contact one of our business - corporate attorneys for a free consultation in Boston or at our Lynnfield office.

Just like mortgages and security agreements (that secure personal property) a personal guaranty serves as collateral so as to secure a loan. Here, the collateral is a promise by a third party to repay the debt should the primary debt obligor default on the promissory note. A personal guaranty drafted by an experienced Massachusetts corporate lawyer can provide strong protection for the financial interests of a lender. However, the viability of a personal guaranty depends on the financial condition and asset holdings of the guarantor. If, for example, the guarantor becomes insolvent or has no assets to satisfy a potential judgment on the promissory note then then collection on the guaranty becomes unrealistic and a lender will end up spending legal fees on a debt that will never be repaid. Therefore, it is important for a lender to perform due diligence on any guarantor prior to entering into this type of contract. 

In Massachusetts Courts, the enforcement of personal guaranties is a common theme of lawsuits on promissory notes. The guaranties are almost always contested by any guarantor with something to lose. Therefore, a pre-printed or template form will cause the lender and note holder to assume a substantial amount of risk that the guaranty will be found unenforcable. If you have questions abut personal guaranties for any loan transaction, please contact one of our business lawyers who advise clients in Eastern Massachusetts on these types of transactions.  NORTHSHORE LEGAL may be reached for a free consultation at 781-463-6063.

What are my options if a Lis Pendens is Wrongfully Filed Against my Property?

A Lis Pendens, also known as , is a legal notice approved by a Massachusetts judge that is recorded at the Registry of Deeds to which the related property is situated. This legal notice provides record notice that there is a legal action pending against the real estate at issue and/or named in the lawsuit. A Lis Pendens may only be allowed if the applicant makes a claim of a right to title to real property or the use and occupation thereof.  The Lis Pendens differs from a real estate attachment in that the Lis Pendens relates to title or occupation of real property and an attachment is a remedy to secure assets to satisfy a potential judgment or prohibit transfer or concealment of property that could satisify a judgment. 

The effect of the Lis Pendens is to "cloud" that title to the property, or otherwise, create a defect in title that will discourage any potential purchasers or transferees from accepting title to the property.  It can also interfere with and prevent a property owned from obtaining a loan whereby the property is being used as collateral for the loan (mortgage). In almost all instances, no purchaser of real estate or lender will complete a transaction and accept title with a legally valid Lis Pendens recorded against the property.  In other words, the title will need to be cleared and the Lis Pendens released before a property owned can warrant clear title to any prospective purchaser or mortgagee (lender). 

The pertinent Massachusetts statute that governs the use and application of a lis pendens is Mass.Gen. Laws ch. 184 s. 15.  The Statute sets the procedure and requirements for obtaining a Notice of Lis Pendens. In order to obtain a Lis Pendens, an applicant must file a verified complaint; identify the real estate and property owners; and describe a claim that relates to title or occupation of the real property.  

What are your options if a Lis Pendens is Wrongfully Filed Against your personal or business property?

In the instance of a Notice of Lis Pendens that was inadvertently filed against a property, a qualified real estate attorney can help you clear title.  There are some cases where the property address or recording information was misidentified by the lis pendens application; an old title abstract was relied on; or there was some other type of clerical error either in drafting or recording the notice.  In these cases, the applicant will release the notice voluntarily.  

In other instances, an applicant who has deliberately an/or has in bad faith filed a notice of Lis Pendens against a property is subject to civil liability. A respondent to a Lis Pendens may file a special motion to dismiss on the basis that it is frivolous. "The special motion to dismiss shall be granted if the court finds that the action or claim is frivolous because (1) it is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the statute of frauds." M.G.L. ch. 184, s. 15(c).  If the Court grants the special motion to dismiss, it will dissolve the Lis Pendens and may award legal fees and expenses (including recording fees) associated with the dissolution of the notice.  Legal fees may be awarded for any discovery (including document requests, interrogatories or depositions) related to the dissolution of the notice.  

If you have questions about a Lis Pendens or one was recorded against your property, contact one of our Lynnfield Real Estate and Litigation lawyers for a free consultation.   

Rent, Expenses and Term – Fundamental Components of Commercial Leases

          When entering into a new commercial lease, it is essential that you engage a commercial lease attorney to assist you in reviewing and negotiating the important terms.  This blog article will highlight the most fundamental lease component base rent, expenses that are often passed on to the tenant, and the term of the lease. 

          The most common factor in evaluating the cost of a commercial lease in Massachusetts is the base rent, which is most commonly assessed base on square footage of the rental property.  One should also pay attention to any adjustments in rent per annum.  Once a business owner determines an acceptable rent amount, he/she should consider the rent adjustments and additional expenses that will be associated with renting the space.

          The most common type of commercial lease is the triple net (NNN) lease that will shift the financial burden of property taxes, insurance and common area maintenance (CAMS) and/or operating costs to the commercial tenant. However, triple net leases can also contain additional provisions that expand the scope of tenant financial liability on the leases.  In some cases, commercial landlords may shift the entire burden of property maintenance, repairs, upgrades, and upkeep on the commercial tenant.  This means that the tenant will be responsible for cleaning, snow removal, landscaping, repairs to mechanical systems, and other common every day repairs.  Here, liability may fall on the tenant for the entire building and land, or just a portion thereof, or solely the interior of the property.  In many instances of shared commercial space, commercial landlords will charge the tenant operating costs or CAMS, and maintenance and repairs will be included in the lease.  In this case the tenant will pay its pro rata share of the common expenses, and will not have to bear the entire burden of such expenses.      

           When entering into a new commercial lease, one of the most important features to consider (other than the price) is the term of the commercial lease. In this case, it is important that you consult a Boston area commercial lease attorney to help you with the various issues and considerations that can arise when evaluating a lease term.  In many cases, commercial landlords will offer better rent terms with a longer term of tenancy.  However, this is not a general rule, and a business owner should consider their medium and long term goals for growth prior to committing to a location.  Commercial leases are excessively difficult to avoid for tenants in Massachusetts without significant financial penalty or litigation, so it is best to determine whether the needs and plans for the business align with the term of the proposed tenancy. Additionally, a prospective tenant should conduct significant due diligence prior to entering into a long term lease, including a inspections of the physical condition of the building, assessment of traffic and parking, review of local bylaws, regulations and permit/license requirements, and a review of the surrounding area for its character, propensity for crime, ongoing development, and other features of the area.

            If you are a business owners in Eastern Massachusetts who requires assistance from a commercial real estate attorney that is experienced in drafting, reviewing, negotiation and consulting with clients on commercial leases, you may contact the Law Office of Stefan Cencarik for your leasing needs.  Our commercial lease attorneys are able to help guide you through this process and we can leverage our network of professionals to assist you in evaluating your next business location.

Commercial Leasing for New Businesses

When considering a new commercial lease for your business, it is essential that you assemble the right team to assist you with assessing the value of the location and contract, negotiating and reviewing the lease terms, and assessing other important features of the building and location.  In addition to using the services of a commercial real estate broker and/or commercial leasing specialist, it is crucial that you engage a commercial lease attorney.  An attorney that is experienced in drafting, reviewing and negotiating the different material terms and clauses in a commercial lease can help ensure that you sleep better at night after signing a long term contract for new office or facility.

A commercial lease is a legally enforceable contact that will span a considerable amount of time, such as five years, and will becoming a significant part of your operating budget.  A commercial lease is unlike a residential lease in Massachusetts as the residential tenant protections do not apply in this area.  In this regard, commercial leases are regarded strictly as a business transaction and the commercial landlord is providing a significant amount of authority and rights over the commercial tenant.  There are many clauses concerning default, destruction of the property, base rent adjustments, maintenance expenses, and others that can shift financial and legal responsibility from the landlord to the tenant.  These clauses become traps for the unwary and the involvement of a commercial lease attorney can help you avoid these trap and put your business on the path to success. 

The Law Office of Stefan Cencarik, PLLC and its commercial lease attorneys (commercial real estate lawyers) are adept at drafting, reviewing, negotiating and consulting with clients on commercial leases.  We can also leverage an experienced trusted professional network so as to recommend the right consultant and brokers to help you find, select, and evaluate your next commercial lease property.