Bank guarantee

A bank guarantee is a commitment by a financial institution to cover the tenant's or borrower's obligations to the landlord or lender. It serves as security in commercial property transactions, protecting the property owner against non-payment or breach of lease conditions.

The guarantor assumes liability and becomes responsible should the primary obligor fail to meet their commitments. This is particularly valuable for landlords leasing office or industrial space to new businesses or firms with limited credit history.

Guarantees can be single-event (covering initial rent, for example) or continuous (covering the entire lease term). Fees are typically borne by the tenant and vary based on creditworthiness and risk assessment.