Does Lease Termination Let Rent Guarantor Off the Hook?

SITUATION: A tenant leases restaurant space with its principal acting as guarantor. Under the guaranty agreement, the landlord is allowed to show the tenant leniency and make lease modifications, extensions, or amendments with the tenant without notifying the guarantor. The guarantor’s obligations, the agreement concludes, “shall be extensive with and shall remain in effect as long as Tenant’s obligations in and under said Lease, and all extensions or modifications thereof shall continue, and as long as said Tenant shall be liable Guarantor shall be liable thereunder in the same manner and in the same effect.”

Six months later, the restaurant is in default. The sides enter into an agreement in which the landlord acknowledges that the lease is terminated and releases the tenant from all lease obligations. The landlord doesn’t notify the guarantor, who has since divested his ownership interest in the restaurant. The landlord also includes a provision expressly stating that the termination agreement doesn’t release or bar its right to proceed against the guarantor under the guaranty. And that’s just what the landlord does.

QUESTION: Is the guarantor still on the hook for the tenant’s default?

A. No, because by releasing the tenant, the landlord also released the guarantor.

B. Yes, because the guaranty allows the landlord to show the tenant leniency.

C. No, because the guarantor no longer owns the tenant.

D. Yes, because the termination agreement expressly says the guarantor isn’t released.