From time to time in UK real estate finance transactions, a high-net-worth or ultra-high-net-worth sponsor will be called upon to provide a personal guarantee. A lender’s reasoning in requiring a personal guarantee is that it may have some value if the lender is not able to recover the amount it is owed from the real estate, which is the primary value that it relies on, though, of course, it is not obliged to seek recovery from the real estate first. Alternatively, the lender may have identified a particular risk, often late in the day, which requires the sponsor to undertake a certain action, such as discharging a liability relating to the real estate within a defined time period. The personal guarantee aims to provide the lender with comfort that the sponsor would not wish the personal guarantee to be called, and so has an incentive to undertake the required action within the stipulated time period.

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