Get U.S. Guarantor When Leasing to Foreign Tenant

If a prospective tenant isn’t a U.S. business or individual, it may not have sufficient assets within the U.S. to protect you if it eventually defaults. Preferably, the tenant can provide a U.S. guarantor. But if a non-U.S. entity or individual is the only available option, be sure to confirm that the guarantor has sufficient assets in the United States. And in the absence of a guarantor, consider using letters of credit or a security deposit.

Other items to address when negotiating and drafting a lease with a non-U.S. tenant:

• Local agents. Require the appointment of local agents to accept notices and service of process for both the tenant and guarantor.
• Acknowledgement of jurisdiction. Draft clear and express language in the lease and the guaranty that the respective parties submit to the jurisdiction of the applicable court.
• Acknowledgement of final judgment. Draft clear and express acknowledgements by the tenant and guarantor that the final judgments are binding.
• Choice of law. Include a clear choice-of-law provision identifying the law governing the lease.

To read about a New York case that illustrates the need for clarity with respect to drafting the jurisdictional and choice-of-law provisions of the lease and guaranty, see “Leasing to Non-U.S. Tenants: Protecting Against Default and Ensuring Enforcement,” available to subscribers here.