Personal Guarantees in Queensland Commercial Leases: Director Risk, Limits and Release

Last updated: 24 August 2026

Quick answer

A personal guarantee can make a company director or another guarantor personally responsible for a tenant company’s lease obligations. Depending on the drafting, exposure may extend beyond unpaid rent to outgoings, interest, legal costs, damage, make good and other losses. The guarantee should be reviewed, negotiated and documented before the lease or related deed is signed.

Quick summary

Before giving or accepting a personal guarantee under a Queensland commercial lease, check:

• who is giving the guarantee and in what capacity;
• which tenant obligations are guaranteed;
• whether liability is capped by amount or time;
• whether liability is joint and several where there is more than one guarantor;
• whether variations, renewals, holding over or assignments extend the guarantee;
• when the guarantor is entitled to notice of a tenant default;
• what happens if the business, shares or lease are transferred;
• whether a bank guarantee, cash bond or other security is also required; and
• exactly when and how the guarantor will be released.

A director’s resignation, a share sale, the end of day-to-day involvement in the business or an informal promise from an agent does not necessarily release a signed guarantee. A written release or a clearly applicable statutory release may be required.

What is a personal guarantee in a commercial lease?

A personal guarantee is a promise by a person—commonly a director of a corporate tenant—to answer for obligations owed by the tenant under the lease. The company remains the tenant, but the landlord gains an additional person against whom it may be able to enforce the guaranteed obligations.

This matters because a company is a separate legal entity. ASIC explains that directors and shareholders are not automatically liable for every company debt merely because of their position. However, a director who signs a personal guarantee may become personally liable for the relevant company debt or obligation.

Commercial leases often combine a guarantee with an indemnity. A guarantee and an indemnity are legally distinct, and the drafting can affect the landlord’s enforcement rights and the guarantor’s defences. The document should be reviewed as a whole rather than relying only on a heading such as “Director’s Guarantee”.

Why do landlords request director guarantees?

A landlord may be concerned that a tenant company has limited assets, a short trading history or few resources available if the lease is breached. A director guarantee can provide an additional source of recovery and may encourage the people controlling the tenant to ensure that lease obligations are performed.

From the tenant’s perspective, however, the guarantee can weaken the protection normally associated with operating through a company. The Queensland Small Business Commissioner warns that a personal guarantee can expose a guarantor’s personal assets to legal processes if the tenant company does not meet its obligations.

Whether a guarantee is commercially appropriate depends on factors including the tenant’s financial position, the lease term, rent, fitout contribution, incentives, security package, premises, permitted use and the landlord’s risk. It should not be treated as an administrative signature page.

What can a lease guarantee cover?

The answer depends on the words of the guarantee. A broadly drafted guarantee may cover:

• rent and additional rent;
• operating expenses and outgoings;
• GST, interest and recovery costs;
• repair, maintenance and reinstatement obligations;
• damage to the premises;
• make good and de-fit costs;
• obligations during a holding-over period;
• losses arising from early termination or abandonment;
• indemnities given by the tenant;
• obligations under a variation, renewal or option term; and
• other amounts payable under the lease or a related deed.

Some guarantees are expressed as continuing obligations. Others may provide that the guarantor remains liable despite changes to the tenant, lease, rent, term, premises or commercial arrangement. The exact drafting must be checked because the word “limited” in a company name does not cap a separate personal promise made by a guarantor.

Personal guarantee, bank guarantee and cash bond compared

These forms of security are not interchangeable. A lease may require more than one. Queensland does not generally require commercial or retail lease security deposits paid directly to a landlord to be registered with a government bond authority. That makes the lease wording, receipt, holding arrangement and release mechanism especially important.

Are company directors automatically personally liable for the lease?

No. A company director is not automatically a guarantor simply because the company signs a lease. Personal liability can nevertheless arise through a signed guarantee, an indemnity, other contractual commitments or separate statutory duties.

Signature blocks should be checked carefully. A person may sign once as an authorised representative of the tenant company and again in a personal capacity as guarantor. The lease, incentive deed, disclosure documents and any separate guarantee deed should be reviewed together.

If there are several guarantors, the guarantee may state that liability is “joint and several”. This can allow a landlord to pursue one guarantor for the whole recoverable amount, leaving contribution issues between guarantors to be dealt with separately. Guarantors should not assume the exposure will automatically be divided equally.

When can a landlord seek payment from a guarantor?

The lease and guarantee usually identify the events that trigger liability and whether notice or demand is required. Common triggers include unpaid rent, failure to pay outgoings, an unremedied breach, abandonment, termination or failure to complete make good.

Some guarantees permit action against the guarantor without requiring the landlord to exhaust recovery against the tenant first. Others contain notice, demand or cure requirements. The landlord should follow the agreed process and any applicable legislation; the guarantor should not ignore a demand or breach notice while assuming the tenant company will resolve it.

The consequences can be serious. A judgment against an individual guarantor may lead to enforcement against personal assets, subject to applicable law and the person’s circumstances. If a demand has been received, early review of the lease, guarantee, payment history, notices and correspondence is important.

Does insolvency of the tenant company cancel the guarantee?

Not necessarily. A tenant’s financial distress, voluntary administration, restructuring, liquidation or deregistration does not automatically erase a separate personal guarantee. Insolvency law can affect when and how enforcement steps may be taken. For example, ASIC notes that temporary restrictions can apply to enforcing certain director guarantees during voluntary administration or small business restructuring, while later enforcement rights may remain.

Landlords and guarantors should obtain urgent advice where insolvency is involved. Lease enforcement, insolvency moratoriums, proofs of debt, security rights and personal liability can interact in ways that are not resolved by the lease alone.

Assignment of a Queensland lease: when is a guarantor released?

Assignment is a major risk point. A business owner may sell the business and transfer the lease but remain exposed under an old guarantee unless the documents or legislation produce a release.

For Queensland leases generally, section 144 of the Property Law Act 2023 addresses a later re-assignment. If the original lessee assigns the lease and the first assignee later assigns it again, the original lessee and any guarantor of that original lessee are released from liability to the landlord for a breach by the subsequent assignee. This provision applies despite an agreement to the contrary.

That rule should not be misunderstood as an automatic release of every guarantor on the first assignment. The assignment deed, landlord’s consent, lease terms, accrued liabilities and statutory provisions must still be checked.

Retail shop leases have a separate rule. Under section 50A of the Retail Shop Leases Act 1994, an assignor and the assignor’s guarantor may be released from liability for a default by the assignee when the statutory disclosure conditions are satisfied. A defective or missing disclosure statement can affect the operation of that protection.

For practical certainty, an outgoing tenant or guarantor should request express release wording in the deed of consent to assignment rather than relying on silence. Accrued liabilities should also be distinguished from future defaults.

Notice to guarantors under the Property Law Act 2023

Queensland’s Property Law Act 2023, which commenced on 1 August 2025, introduced updated rules for leases. Under section 154, when a landlord gives a notice to remedy breach to a tenant, the landlord must also give a copy to each known “designated person” for the lease. The statutory definition can include a guarantor and certain unreleased assignors or their guarantors.

This notice requirement can give a guarantor an earlier opportunity to understand and respond to a default. However, the Act also states that failure to provide the copy does not itself prevent the landlord from exercising termination, re-entry or other relief rights. Both landlords and guarantors should therefore keep current notice details and act promptly.

Can a personal guarantee be negotiated or capped?

Yes. A proposed guarantee is part of the commercial lease negotiation. A landlord does not have to accept a change, but parties can negotiate the risk allocation before documents are signed.

Possible negotiation points include:

1. A monetary cap — for example, a stated dollar amount or a formula linked to a defined number of months’ rent. The drafting should say whether costs, interest, GST and make good sit inside or outside the cap.
2. A time limit or burn-off — liability may reduce or end after a period of compliant trading, provided there is no existing default.
3. Specific guaranteed obligations — limit the guarantee to rent and outgoings rather than every obligation and indemnity under every related document.
4. Excluding future variations — require the guarantor’s written consent before a variation, renewal, expansion or additional premises increases exposure.
5. Notice and cure rights — require prompt written notice of default and a reasonable opportunity to address the issue before enforcement, where commercially acceptable.
6. Release on assignment or business sale — include a defined release mechanism when an approved assignee takes over and provides replacement security.
7. Release at lease end — specify when the guarantee ends after expiry, surrender or termination and completion of payment and make good obligations.
8. Alternative security — negotiate a bank guarantee, cash security, higher bond or parent-company guarantee instead of, or in substitution for, an unlimited personal guarantee.
9. Several rather than joint-and-several exposure — where multiple guarantors are involved, consider whether each person’s liability can be separately limited.

A cap that looks clear can still be undermined by separate indemnities, legal-cost clauses or related incentive documents. All lease documents should use consistent limitations.

Could unfair contract term laws apply?

Australian Consumer Law protections may apply to unfair terms in certain standard form small business contracts, including contracts involving an interest in land. For contracts made, renewed or varied from 9 November 2023, the small-business test generally includes a business with fewer than 100 employees or annual turnover below $10 million.

This does not mean every personal guarantee in a standard lease is automatically unfair or unenforceable. The application of the law depends on the contract, parties, bargaining process, transparency, legitimate interests and the effect of the particular term. A tailored legal review is required before relying on unfair contract term protections or asserting that a guarantee is invalid.

What should landlords check before accepting a guarantee?

Landlords also need careful drafting and process. They should confirm:

• the correct legal names and addresses of guarantors;
• that execution requirements have been followed;
• the guarantee matches the lease and any incentive deed;
• the promised security package reflects the commercial offer;
• variations, renewals and assignments are documented consistently;
• notices are given to the correct parties and addresses;
• replacement security is obtained before releasing existing security; and
• any release is intentional, written and limited to the agreed liabilities.

An unclear guarantee can create enforcement disputes. Overly broad boilerplate can also increase negotiation friction and may raise unfair contract term questions in eligible standard form small business contracts.

Director guarantee checklist before signing

Ask the following questions before signing:

• Am I signing only for the company, or also personally?
• Is there a separate guarantee or indemnity deed?
• What is the maximum possible exposure?
• Does the guarantee cover rent only, or every lease obligation?
• Are make good, legal costs, interest and incentives included?
• Does liability continue during options, renewals or holding over?
• Can the lease be varied without my consent?
• What notice must I receive if the tenant defaults?
• What happens if I resign as director or sell my shares?
• What happens if the business and lease are assigned?
• Is there a written release date or release mechanism?
• Is alternative security commercially available?

Frequently asked questions

Does resigning as a director end a lease guarantee?

Usually not by itself. The guarantee is a contractual obligation, and a change in officeholding does not automatically cancel it. Check the guarantee and obtain an express written release if the landlord agrees.

Does selling my shares release me from a director guarantee?

Not automatically. A share sale changes ownership of the tenant company but may leave the tenant entity and the existing guarantee unchanged. Release and replacement-security provisions should be negotiated as part of the transaction.

Can a landlord require both a bank guarantee and personal guarantee?

Yes, the commercial terms may require multiple forms of security. The tenant can negotiate the amount, duration, interaction and release of each before signing.

Can a personal guarantee be limited to a fixed amount?

Yes, if the parties agree and the documents clearly implement the cap. Check whether interest, costs, GST, indemnities and make good are included in or added to the cap.

Does a guarantee automatically end when the lease expires?

Not always. Liability may continue for unpaid amounts, damage, make good or other obligations arising before handover. The release wording should state when the guarantor’s obligations end and whether a written release will be provided.

Can a landlord pursue the guarantor before suing the tenant company?

It depends on the guarantee. Some documents allow direct enforcement following default and demand; others impose procedural requirements. Review the actual terms and any applicable statutory notices.

How Ensure Legal can assist

A personal guarantee can be one of the highest-risk provisions in a commercial lease. It should be considered together with rent, outgoings, incentives, repairs, make good, assignment and the complete security package.

Ensure Legal assists Queensland landlords, tenants, business owners and directors with commercial lease review, drafting and negotiation. We can also assist with commercial leasing matters, lease disputes and guarantee demands, and the broader issues identified in our Queensland business lease guide.

Related reading: Negotiating a business lease in Queensland.

If you have been asked to sign a director guarantee, send the lease, disclosure documents, incentive deed and proposed security documents for review before signing.

Official sources

• Queensland Small Business Commissioner — Commercial lease bond
• Queensland Legislation — Property Law Act 2023
• Queensland Legislation — Retail Shop Leases Act 1994
• Business Queensland — Leasing premises
• ASIC — Company director liabilities when things go wrong
• ACCC — Contracts and unfair contract terms

This article provides general information only and is not legal advice. Commercial lease and guarantee outcomes depend on the documents, facts, parties and applicable legislation. Obtain advice for your circumstances before signing, varying, assigning or seeking to enforce a lease or guarantee.

2026 Guarantor Exit Checklist

A business sale, director resignation or landlord consent to an assignment does not automatically end a personal guarantee. Before completion, review each item below and obtain an express written outcome.

1. Identify every security document. Collect the lease, guarantee, indemnity, cash bond, bank guarantee, variations, renewals, options and assignment deeds.
2. Confirm who the tenant is. A share sale or director resignation usually leaves the same company tenant in place and may not trigger an assignment release.
3. Classify the lease. Retail shop lease release under section 50A and general commercial lease release under section 144 operate differently.
4. Check the lease date and assignment chain. Transitional provisions can affect whether the current Property Law Act release applies.
5. Review accrued defaults. A statutory or contractual release may not remove liability that accrued before assignment.
6. Check renewal and variation wording. Continuing-guarantee and indemnity language can deal differently with an option, a new lease, holding over or a material variation.
7. Negotiate an express deed of release. Name every outgoing tenant and guarantor and state the effective date and treatment of existing claims.
8. Deal with each security separately. Return of a bank guarantee or cash bond does not necessarily release a personal guarantee, and the reverse is also true.
9. Retain delivery evidence. For a retail assignment, keep the section 22B disclosure statement, advice reports and proof of timing because defects can affect section 50A release.
10. Do not rely on an approval email alone. Check that the executed assignment or release deed matches the commercial understanding.

Renewals, variations and continuing guarantees

There is no safe universal statement that a guarantee always continues, or always ends, when a lease is renewed or varied. The result depends on the defined terms, guarantee and indemnity wording, any advance consent, the structure of the option or new lease, and later deeds.

Landlords should obtain clear confirmation from the intended guarantor when a renewal or material variation is documented. Guarantors should not assume that silence or a director resignation ends an earlier promise.

Additional official resource

• Queensland Small Business Commissioner — Commercial lease bond