Guarantor vs Indemnitor
For a landlord it is always better to have a third party indemnity rather than a guarantee. If a tenant defaults, the indemnitor is primarily liable, whereas under a guarantee, the guarantor is only secondarily liable; This means is that if there is a guarantee and the tenant defaults under the Lease, the landlord must first exercise all of its rights against the tenant (which could expensive) and only then can the landlord claim against the guarantor.
Under an indemnity, even before the proven default by the tenant, the landlord can claim directly against the indemnitor.
An obligation to indemnify means an obligation to protect against or keep free from loss, to repay for what has been lost or damaged, to compensate for a loss.
Traditionally, the indemnity contract sets up another party from whom a lessor may collect or demand performance concurrent with the primary lessee. For example, an indemnitor (the person who agrees to indemnify) to a Lease may be asked by the lessor to contribute to the payments from the get-go; even before or in the absence of non-payment by the primary Lessee. Also if the lessee declares bankruptcy then the indemnitor is still liable.
Contrary to a guarantee, it provides the Lessee with a "side-kick", a partner; a person who stands beside him and from whom the lessor can demand payment; from either the lessee or, at the lessor's option, from the indemnitor; or both!
A guarantor is bound to fulfill the engagement he has entered into, provided the lessee does not. He is bound only to the extent that the lessee is, and any payment made by the latter, or release of him by the lessor, will operate as a release of the guarantor. A guarantor also differs from an indemnitor in that the former cannot be sued until a failure on the part of the lessee, when sued; while the latter may be sued at the same time with the principal, plus if the lessee declares bankruptcy, then the lessee has no further obligations to the lessor, thus the Guarantor will also not have any further obligation to the lessor.
Thus for the landlord it is better to have an indemnity by a third party, but caution is advised for anyone asked to sign as a indemnitor, and legal advice should be sought for a full list of all obligations and rights pertaining to being an indemnitor vs a guarantor. The article above is for information purposes and is not legal advice or a substitute for legal counsel.
