All About Lease Bonds

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Commercial real estate lease

What is a lease guarantee?

Before you rent commercial real estate, your future landlord may require you to obtain a lease guarantee. Landlords often request this if prospective tenants don’t meet their credit requirements. A lease guarantee can benefit both tenant and landlord. The landlord, tenant, and a third party (guarantor) must sign the lease guarantee. The third party must meet the landlord’s credit and monetary requirements. The guarantor acts as an intermediary and agrees to take responsibility for the tenant’s obligations – should they default. This protects the landlord by ensuring payment. It also protects the tenant from facing eviction.

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Quick Takeaways

  • Before renting commercial real estate, your prospective landlord may require you to obtain a lease guarantee.
  • A lease guarantee bond protects the landlord by ensuring that a tenant will meet the terms of their commercial lease agreement.
  • If you don’t qualify for the required bond amount, your surety may require collateral.

What is a lease guarantee bond?

A lease guarantee bond is a miscellaneous surety bond that guarantees a tenant will meet the terms of their commercial lease agreement. The bond protects the landlord by holding the tenant accountable. If the tenant violates the contract in any way, the landlord may file a claim on the bond to receive payment. Lease agreement terms may include on-time payments, property maintenance, provision-replacement security, and early lease termination. Liability won’t accrue to the tenant or surety until the landlord fulfills their part of the contract. The bond may have state-specific start and end dates.

How do lease bonds work?

Lease bonds are three-party agreements:
  1. The landlord is the obligee, the party that requires the bond.
  2. The tenant is the principal who must acquire the bond.
  3. The surety is the company that issues and backs the bond on behalf of the principal.

The bond protects the obligee financially by ensuring the principal fulfills the contract terms (carries out the lease terms). If the tenant fails in some way – defaults on the contract – the landlord may file a claim on the bond to seek payment. The surety may step in to cover the costs initially, which can’t be more than the total bond amount. The principal must later make the surety whole.

How much does a lease guarantee bond cost?

Since sureties often underwrite lease bonds for specific lease agreements, pricing can vary extensively. These bonds are higher risk than many other bond types. You can begin the application today online, or call ZipBonds directly, and we’ll guide you through the process.

To become a commercial property tenant, you may need a surety bond to qualify for the lease. Your bonding company may also require you to sign a general indemnity agreement (a document outlining your relationship). Landlords sometimes require surety bonds for long-term lease agreements as well.

To apply for a lease guarantee bond, make sure you have a draft of your lease agreement and updated financial statements handy so the process can go as smoothly as possible. Keep in mind that if you don’t qualify for the required bond amount, your surety may require collateral.

Get a Lease Bond in Your State

ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at 888-435-4191 to speak with an agent.

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About ZipBonds.com

Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.