Anyone here have experience dealing with a "good guy clause" in a retail lease? In my market (Philadelphia), Landlords typically call for tenants to sign a personal guarantee, however, I have had two recent deals I'm working on where the retailers want a "good guy clause" rather than a personal guarantee. My question is this - why would a Landlord ever agree to a good guy clause? Both retailers I'm working with are from either northern Jersey and NYC, so I'm guessing this is somewhat common in those markets.

because a good guy clause is reasonable, and the landlord/owner may be losing money, very anxious to lease the property. as long as the defaulting lessee vacates the property and is current up to that point on lease payments, the landlord can find a new lessee, thus mitigating damages.

Since I posted my question back in November, I've learned a little more about contract law in PA as it relates to commercial real estate transactions. PA is a confession of judgement state, which gives landlords a major leg up in regaining legal possession of a space back from a tenant. Therefore, in PA there is no need for a landlord to work the quid pro quo angle (Tenant agrees to turnover the space and landlord agrees to not pursue legal action).

Also, regardless of the above, even if a good guy clause may seem "reasonable" I can't imagine many lenders would approve new leases with good guy clauses on properties they have loans on. Additionally, if a property is for sale, what investor is going to buy a property (a shopping center for example) if the tenants all have good guy clauses? Not many.