Summary
When a company rents commercial space, the landlord often asks the owner or a director to sign a personal guarantee. That one page can make a person answer for a business's rent. This post explains how guarantees and indemnities work in Ontario, what the law requires in writing, and what each side should check. It is written for guarantors, tenants and landlords.
Who it affects
Business owners and directors asked to guarantee a lease, tenant companies, and commercial landlords who take a guarantee as security. This post covers commercial leases only, under the Commercial Tenancies Act.
Why landlords ask for a personal guarantee
A new or small company may have few assets. If it stops paying, the landlord's claim against the company alone may be worth little. A personal guarantee gives the landlord a second person to look to. For the tenant, a guarantee can be the price of getting the space, or of better terms.
Guarantee vs. indemnity
Many lease documents use both words. Section 4 of the Statute of Frauds applies to a "special promise to answer for the debt, default or miscarriage of any other person". Whether a particular document is that kind of promise, or something else, turns on its wording, so read what you are signing or asking for.
Must it be in writing?
Yes, for a guarantee. Section 4 of the Statute of Frauds says no action may be brought to charge a person "upon any special promise to answer for the debt, default or miscarriage of any other person" unless the agreement, or a memorandum or note of it, is in writing and signed by the person to be charged or someone lawfully authorized by them. A verbal promise to "back" the tenant is not enough for that kind of claim.
For guarantors: what to check before and after signing
These are general points to review, not a complete list:
Scope: rent only, or every tenant obligation, including repairs, taxes and the landlord's costs?
Amount and time: is there a cap, an end date, or a release after a period of on-time payment?
Renewals and amendments: does the guarantee say it continues through renewals, extensions, amendments or an assignment of the lease?
Who signs: are you signing personally, for the company, or both? Read the signature block.
Notice: will the landlord tell you about a default before calling on you?
After signing: keep a copy, and watch for lease changes, assignments or renewals that may affect you.
For landlords: drafting for enforceability
Put the guarantee in writing and have it signed. Section 4 requires the signature of the person to be charged or someone lawfully authorized by them; having each guarantor sign personally avoids a later dispute about authority.
State plainly what is covered: rent, additional rent, other covenants and costs.
Say whether the guarantee survives renewals, extensions, amendments, assignments and a disclaimer of the lease.
Keep the signed original with the lease.
When the tenant company fails
If the tenant makes an assignment for the general benefit of creditors, is wound up, or is the subject of a receiving order or authorized assignment in bankruptcy, section 38(1) of the Commercial Tenancies Act restricts the landlord's preferential lien for rent to arrears for the three months before and the three months after the assignment, and then for as long as the assignee keeps possession. Disputes under that section go to a judge of the Superior Court of Justice (section 39(3)). Whether, and how far, a landlord can then turn to a guarantor depends on the guarantee's wording and on insolvency rules this post does not cover.
What it means
For guarantors, a personal guarantee can turn a business debt into a personal one, so its wording matters as much as the lease. For landlords, a guarantee is only as useful as the document behind it. Both sides benefit from reading the guarantee and the lease together before anyone signs.
Key takeaways
A promise to answer for another's debt must be in writing and signed to be sued on (Statute of Frauds s. 4).
"Guarantee" and "indemnity" are both used in lease documents; check what the wording of yours actually promises.
Guarantors should look at scope, caps, end dates and renewals before signing.
In a tenant's bankruptcy, the landlord's preferential lien for rent is limited by section 38(1).
Related posts: Unpaid commercial rent: Ontario options · Commercial lease review in Ottawa · Assigning a commercial lease in Ontario. For business owners: how to decide on your business structure, 7 reasons to incorporate, our business formation services, and how commercial lease disputes arise.
Frequently asked questions
Can the landlord sue me personally if my company stops paying?
If you signed a personal guarantee or indemnity, the landlord may try to enforce it against you. What you owe depends on the wording of the document you signed, so have it read before you respond to a demand.
What if I never signed anything personally?
Under section 4 of the Statute of Frauds, no action can be brought on a promise to answer for another person's debt or default unless the agreement, or a memorandum or note of it, is in writing and signed by the person to be charged or someone lawfully authorized by them. A signature by someone you authorized counts, and section 4 covers only that kind of promise, so you may still face a claim on another basis. If a landlord says you are personally liable, have the documents reviewed.
Can I negotiate a cap or an end date?
Often, yes. A cap on the amount, a time limit, or a release after a set period of on-time rent are terms a guarantor can ask for before signing. Whether the landlord agrees is a matter of negotiation.
Does a lease renewal extend my guarantee?
Check the guarantee itself. Many guarantees say whether they cover renewals, extensions and amendments. If the wording is unclear, get advice before you sign the renewal or an amending agreement.
Whether you're a landlord or a tenant, book a consultation
For help with a lease, see our commercial leasing lawyers in Ottawa.
Francis Mehr LLP handles commercial lease matters for landlords and tenants in Ottawa and across Ontario. Book a consultation: call (613) 226-1011 or contact us.
Written by the lawyers of Francis Mehr LLP. Updated October 30, 2026. This post is general information about Ontario law as of that date, not legal advice. Every lease and every dispute turns on its own wording and facts; get advice on your situation before you act.
