Parties generally go into real estate transactions with the hope and expectation that the deal (and their relationship) will be a success. Even with the best of initial circumstances, however, it is wise to give some thought to what will happen if the relationship sours—particularly in large or complex transactions. This three-part series will examine some common aspects of real estate transactions that can benefit from a litigation analysis in the negotiation phase, with the first article focusing on guaranties.
A guaranty is an agreement by someone else (the guarantor) to be responsible for some or all of the obligations of a party to a transaction (the primary obligor) if that party fails to perform. Guaranties are typically given by a principal or affiliate of the primary obligor. They are frequently used in real estate transactions, especially where the primary obligor is a single-purpose entity.