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Articles Posted in Real Estate Litigation

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When a guarantor is sued based on an absolute guarantee of a debt, the guarantor may either challenge the validity of the guarantee or show that the guaranteed debt is not owed.  Under Florida law, the guarantor can be held liable only when a court determines the guaranty is lawful and the alleged debt is actually owed.  In other words, a guarantor may not escape liability if the absolute guarantee is lawful and the party owing the underlying debt is liable under that debt.  Peter Mavrick is a Fort Lauderdale business litigation attorney with extensive experience in defending and prosecuting the interests of businesses in court proceedings and arbitration.

As discussed in the recent decision by Florida’s Fourth District Court of Appeal in Gulfstream Park Racing Ass’n, Inc. v. MI-V1, Inc., 286 So. 3d 315 (Fla. 4th DCA 2019), guarantors are limited in the defenses they may bring in a breach of contract action concerning a guaranteed debt.  In Gulfstream, the appellate court reviewed the propriety of a jury verdict holding the tenant liable but not, however, the guarantor of the tenant’s debt.  The plaintiff was a commercial landlord.  The landlord claimed that the tenant had not paid required monthly rent, and therefore locked the entrance to the tenant’s nightclub.  The landlord’s action was an apparent violation of § 83.05, Florida Statutes, which prohibits commercial landlords from undertaking “self-help” that inhibits tenant use over the leased property unless either the landlord won a judgment of eviction, the tenant surrendered the property, or the tenant abandoned the property.

The Gulfstream landlord sued the tenant and the guarantor for the tenant’s liability for a breach of the lease.  The tenant and the guarantor claimed they were not required to pay rent because the landlord’s self-help violated § 83.05, Florida Statutes.

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An oral agreement is usually binding but not always. Florida has a statute of frauds so certain types of contracts are not binding unless they’re in writing and signed by the party against whom it’s charged. For example, selling a house or a piece of real property requires a written agreement. It has to be signed by the other party. Commercial leases exceeding a year’s length will need to be in writing. There’s a witness requirement of 2 witnesses to the execution of the lease. Many other contracts can be enforced simply because they’re oral contracts where one part has agreed and as somebody has often said, its simply a handshake where they’ve mutually agreed orally as to what the contract is.

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A lease guarantee is a promise by somebody to pay the obligations under the lease, separate from the signatory to the lease. This typically will happen where a business owner will lease premises in a shopping center. The business will sign a lease and the landlord of the shopping center will demand that the business owner himself personally sign a promise that it will pay for what’s owed in the lease in case the business doesn’t pay. Those are very risky documents to sign sometimes because sometimes the business owner many years later will sell the business and forget that it had this guarantee. If the new buyer years later breaches the lease the shopping center owner, the landlord sometimes will come after the guarantor. The business owners often have to be very careful to revoke the guarantee.

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