Bank Guarantee Fees, Risks and Release

A bank guarantee is a bank's written undertaking to pay a beneficiary, such as a landlord or principal, up to a stated amount on a conforming demand. Costs can include an establishment fee, an ongoing percentage or periodic charge, and amendment, replacement or cancellation fees. The issuing bank sets its own charges; the lease or contract sets the required wording, amount, expiry and return conditions.

Quick facts	General position
Who issues it	A bank or authorised financial institution — not the beneficiary and not the law firm
Who pays the fees	The customer who applies for the guarantee (commonly the tenant, contractor or applicant)
What secures it for the bank	Cash, a term deposit, property or an approved credit facility
When it can be paid out	When a conforming demand is made under the guarantee wording — often regardless of whether the underlying dispute is resolved
How it ends	By expiry, or by return and cancellation once the beneficiary confirms in writing that it can be released

Do not sign, date or have documents witnessed before the advising lawyer confirms the lender's requirements and reviews the complete document pack.

Which type of guarantee do you need help with?

A bank guarantee for a commercial lease or contract

A bank guarantee is commonly an undertaking issued by a bank in favour of a beneficiary, such as a landlord or principal. It may secure a tenant's lease obligations, a contractor's performance or another contractual obligation. The customer usually provides cash or another form of security to the bank and pays the bank's fees.

A personal guarantee of somebody else's loan

A personal guarantor agrees to become responsible for a borrower's debt if the borrower does not pay according to the guarantee. The document may also contain an indemnity, create obligations broader than expected and be supported by a mortgage over the guarantor's property.

Moneysmart warns that a guarantor may have to repay the entire debt, interest, fees and enforcement expenses and may lose an asset used as security. The guarantee may also affect the guarantor's future borrowing capacity and relationship with the borrower.

What is a bank guarantee?

A bank guarantee is generally a written undertaking from a financial institution to pay a beneficiary up to a stated amount when a conforming demand is made. It is often used instead of a cash security deposit.

The precise effect depends on the instrument. Important terms include the beneficiary, amount, expiry or return mechanism, circumstances for demand, original-document requirements and whether the amount must be replaced or increased. The bank guarantee should match the underlying lease or contract — a mismatch in names, amount, expiry or required wording may delay possession, settlement or acceptance.

What does a bank guarantee cost?

The issuing bank — not Legal Care Australia — sets and charges the fees for a bank guarantee. Publishing one "typical" rate would be misleading, because pricing depends on the issuing bank, the facility type, the guaranteed amount, the security offered, the customer's credit position and whether the guarantee has an expiry date. As a general pattern, Australian banks commonly charge some combination of:

An establishment or facility fee — a one-off amount charged when the guarantee is issued, sometimes a flat fee and sometimes a percentage of the guaranteed amount.
An ongoing or "line" fee — usually a percentage of the guaranteed amount charged per year, subject to a minimum periodic fee set by the bank, so a small guarantee can cost proportionally far more than the headline percentage, billed monthly, quarterly, six-monthly or annually for as long as the guarantee remains on issue.
An amendment or replacement fee — charged when the amount, wording, beneficiary or expiry date changes.
A cancellation, documentation or courier fee — charged when the facility is closed, or when the original instrument is issued, replaced or returned physically.

Guarantees with no fixed expiry date ("evergreen" guarantees) commonly attract a higher ongoing fee than guarantees with a fixed expiry, because the bank's exposure continues indefinitely. Always request the issuing bank's current, written fee schedule for the specific facility — do not rely on a figure quoted for a different customer, product or year.

Cash-backed or secured bank guarantee: what is the difference?

Banks generally offer a bank guarantee on one of two bases:

Cash-backed: the customer places cash, or a term deposit, with the bank equal to the guaranteed amount. The funds are tied up (though they may earn interest) but approval is often faster and simpler because the bank carries little credit risk.
Secured by other means: the bank issues the guarantee within a broader facility, secured by a registered mortgage over property, a general security agreement, or as part of an existing business banking arrangement. This can preserve the business's cash flow, but it uses part of the business's borrowing or security capacity and is subject to the bank's credit approval and ongoing facility covenants.

A lawyer can review the facility and security documents the bank requires and how they interact with the lease or contract, but cannot advise on which option is financially preferable for the business — that is a matter for the business's accountant, financial adviser or the bank itself.

Amount, expiry date and evergreen bank guarantees

The required amount is usually expressed in the lease or contract as a fixed sum or a number of months' rent and outgoings, and may need to increase after a rent review or other adjustment. The guarantee wording should match whatever the lease or contract actually requires.

Expiry arrangements vary:

a fixed expiry date, after which the guarantee lapses unless replaced or renewed;
an automatically renewing guarantee, which continues unless the customer or bank gives notice of non-renewal by a set date — non-renewal can itself sometimes be treated as a trigger allowing the beneficiary to call on the guarantee before it lapses; or
an evergreen guarantee with no expiry date, which remains on foot indefinitely until the beneficiary formally agrees to its release.

Diarise expiry and renewal dates well in advance. Missing a renewal deadline on an automatically-renewing guarantee is a common and avoidable cause of disputes.

When can a beneficiary call on a bank guarantee?

Many commercial bank guarantees are "unconditional" or "on demand," meaning the bank must pay the beneficiary on a conforming demand without needing to assess or resolve the underlying dispute between the beneficiary and the customer. The wording of the guarantee — not the customer's view of who is in the right — usually determines whether a demand is valid.

Common trigger events include an unremedied default under the lease or contract, an insolvency event, or a failure to renew or replace the guarantee before it lapses. Calling on the guarantee does not finally resolve the underlying dispute — the customer may still be able to dispute the beneficiary's entitlement to retain the funds — but recovering money already paid out under a valid demand can be difficult. Obtain advice immediately if a demand is threatened or made.

Return and cancellation at lease end

A lease or contract should state when and how the beneficiary must return the original guarantee, and on what conditions — typically once all rent, outgoings and other amounts owing have been paid and any make-good obligations completed. The customer should:

Confirm every secured obligation, including make-good, has been satisfied.
Request the beneficiary's written confirmation that the guarantee can be released.
Recover the original instrument, where the bank's process requires it.
Provide the release confirmation (and original, if required) to the bank so it can cancel the facility.
Obtain the bank's written confirmation that the facility has been cancelled and any cash or property security released.
Retain all release records with the lease or contract file.

A beneficiary sometimes withholds release because it disputes whether make-good or another condition has been met. That is a lease or contract dispute, and is not usually something the bank itself will resolve.

Replacement when a business or lease is assigned

When a tenant assigns a lease, or a business is sold, the landlord or other beneficiary will commonly require a replacement bank guarantee (often from the incoming tenant or new entity) before releasing the outgoing customer's original. An outgoing tenant, director or personal guarantor should obtain the beneficiary's written release — the transaction completing, or a new tenant taking possession, does not by itself release an earlier guarantee or an associated personal guarantee.

If a replacement is not properly documented, the original bank guarantee, and any personal guarantee supporting it, can remain enforceable against the outgoing party despite the sale or assignment.

Bank guarantee, cash security deposit or personal guarantee: what is the difference?

	Bank guarantee	Cash bond / security deposit	Personal guarantee
Issuer	A bank, in favour of the beneficiary	The customer, paid directly (sometimes held by an agent or under a statutory scheme)	An individual (director, principal or family member)
Cash impact on the customer	Cash, property or facility security is tied up with the bank; bank fees apply	The deposit amount is paid over and held until released	No upfront cash, but the guarantor's personal assets and credit are at risk
Main risk	The bank may pay the beneficiary on a conforming demand, regardless of the underlying dispute	The holder may apply the funds under the agreement or scheme rules	The guarantor becomes personally liable for the debtor's obligations, potentially including interest, fees and enforcement costs
How it is released	Written beneficiary confirmation, then bank cancels the facility and returns/destroys the original	Returned under the lease terms once conditions are met (WA has no statutory security-bond scheme for commercial or retail shop leases; the residential bond scheme does not apply)	Requires the lender's or landlord's written release; involvement in the business ending does not automatically release it
Typical use	Commercial leases, contracts and tenders	Residential tenancies and some smaller commercial arrangements	Business loans, leases and supply arrangements, often alongside a bank or cash security

How do you obtain a bank guarantee in Australia?

The usual process is to apply to a bank or financial institution, satisfy its credit and security requirements and provide the wording required by the beneficiary. The exact process and fees belong to the issuing institution, not the law firm.

For a commercial lease, the practical steps commonly include:

Confirm the amount and form required under the lease or heads of agreement.
Obtain the landlord's required wording and beneficiary details.
Apply to the bank and arrange its required security.
Check that the issued instrument matches the lease.
Deliver the original using the agreed process.
Record the circumstances and deadline for reduction, replacement or return.

Legal advice is particularly useful where the guarantee is payable on demand, has no clear expiry, secures obligations beyond rent, or must be replaced after a rent increase, assignment or renewal.

Bank guarantees in commercial leases

Commercial leases often require a bank guarantee for an amount linked to several months of rent and outgoings. The lease should state the required amount, acceptable issuer and form, replacement obligations and when the landlord must return the instrument.

Tenants should ask:

Can the landlord demand payment for any breach or only specified defaults?
Does the guarantee have an expiry date, and does it renew automatically?
Must it be increased after rent reviews?
What happens on assignment, renewal or lease expiry?
When must the original be returned?
Does a separate personal guarantee also apply?

Landlords should ensure the instrument matches the correct legal entity, amount and agreed requirements. Both parties should coordinate the guarantee wording with the lease rather than treating it as an administrative afterthought.

Hypothetical example

Suppose a Perth business holds a bank guarantee equal to six months’ rent with no expiry date, and at the end of the lease the landlord does not return the original because it disputes the condition of the premises at handover. The tenant could not simply ask the bank to cancel the facility without either the landlord’s written release or another resolution of that dispute. A bank guarantee is autonomous from the lease: the bank does not adjudicate the dispute or take either side, and it cannot cancel the facility while the original instrument remains outstanding and unreturned. This is the type of situation where obtaining advice on the lease and guarantee wording — before pressing the bank — may help a business reach a resolution.

Documents to retain throughout the bank guarantee lifecycle

The lease or contract requiring the guarantee, and any variations.
The bank's application, facility and security documents.
The issued original guarantee, or a confirmed copy while the original is held by the beneficiary.
Correspondence confirming the beneficiary's receipt of the original.
Records of any amendment or replacement, including confirmation that superseded guarantees were returned.
Any demand notice and related correspondence.
The beneficiary's written release or return confirmation.
The bank's confirmation that the facility and any security have been cancelled or released.

What does giving a personal guarantee mean?

A personal guarantee may make the guarantor liable instead of, or in addition to, the borrower. The risk can extend beyond the headline loan amount to interest, fees, variations, future advances and enforcement costs, depending on the wording.

ASIC's prescribed consumer-credit disclosure warns prospective guarantors to read the guarantee and credit contract, obtain independent legal advice and make their own inquiries about the debtor. It also explains that a guarantor may be able to ask about limiting or withdrawing liability before signing.

What independent legal advice covers

The lawyer's role is to advise the guarantor — not to tell them whether the investment or business is financially sound. Within the confirmed scope, an appointment may address:

The identity of the borrower, guarantor, lender and secured parties.
Whether the guarantee is limited or unlimited.
The principal debt, interest, fees and enforcement expenses.
Any indemnity in addition to the guarantee.
Mortgages or other security over the guarantor's assets.
Continuing-security and future-advance provisions.
Variations, waivers and events of default.
The circumstances in which the lender can make demand.
Release, replacement or termination provisions.
The consequences of borrower default.

The lender may require a solicitor's certificate or prescribed acknowledgment. The lawyer can only sign a certificate they are professionally satisfied is accurate after completing the required advice and witnessing process.

What documents should you provide?

Send the complete pack through the approved secure channel before the appointment. Depending on the transaction, this may include:

Guarantee and indemnity.
Loan agreement or facility letter.
Mortgage or security documents.
Credit contract and schedules.
Commercial lease or heads of agreement.
Bank-guarantee instrument or required wording.
Lender's instructions to the independent solicitor.
Solicitor's certificate or acknowledgment.
Company, trust or borrower documents relevant to the parties.
Current identity documents when requested securely.

Do not send only the signature page. The lawyer may be unable to advise or sign a certificate without every document referenced in the pack.

What happens at the appointment?

Document and conflict check: the firm confirms the parties, lender and scope.
Private instructions: the lawyer must be able to speak with the guarantor independently and assess whether they are acting voluntarily.
Document explanation: material obligations, risks and consequences are discussed.
Questions and decision: the guarantor decides whether to sign, seek changes or obtain further financial advice.
Execution and certificate: documents are signed and witnessed only where the lawyer is satisfied that professional requirements are met.
Delivery: the signed pack is returned according to the lender's approved instructions.

The firm cannot promise that a certificate will be issued merely because an appointment has been booked.

How long does the appointment take?

Appointment length depends on the documents and the deadline involved. Time depends on the number and complexity of documents, interpreter needs, lender requirements and whether the guarantor understands and wishes to proceed.

We review the complete pack first and confirm an appropriate appointment length with you. Urgent requests remain subject to lawyer availability, conflict clearance, complete documents and professional obligations.

How much does guarantor legal advice cost?

Independent guarantor advice is $750 including GST per guarantor, for an appointment of up to 60 minutes, and we can usually see you within 48 hours. Where there is more than one guarantor, each person needs separate advice at $750, because we cannot advise two guarantors together.

That fee covers reviewing the guarantee and the loan or lease it secures, a full explanation of what you are committing to and how you might be released, the signed certificate in the form your lender requires, and a written record of the advice given. You will find cheaper certificates advertised online. A personal guarantee can put your home behind someone else’s debt, and the certificate you sign is the document that later proves you understood that, so we give the advice in person, take the time to answer your questions in English or Vietnamese, and keep a proper file note. Negotiating terms, or dealing with a demand already made, is quoted separately. Bank issuance fees, cash-security costs and lender charges are separate and must be confirmed with the financial institution.

Related guides

Bank guarantee lifecycle checklist — a step-by-step checklist from application through to release.
Personal Guarantees in Business and Leasing: What Are You Signing? — what to review before a director or individual signs.
Commercial lease legal advice — for review of the lease requiring the guarantee.

Frequently asked questions

How much does a bank guarantee cost?

The bank that issues the guarantee sets its own fees, which can include an establishment fee, an ongoing percentage or periodic charge, and amendment, replacement or cancellation fees. The amount depends on the guaranteed sum, the security offered and the issuing bank's current schedule. Ask the bank for its current written fee schedule for your facility. Legal Care Australia's own professional fees for reviewing the guarantee or lease are separate and confirmed by written quote after the documents are reviewed.

Can the bank change its fee during the guarantee period?

Facility and ongoing fees are governed by the bank's facility terms, which may allow the bank to vary fees on notice, particularly for guarantees with no expiry date. Check the facility letter and any variation clause, and confirm current charges with the bank directly rather than assuming an earlier quote still applies.

Does a bank guarantee expire?

It depends on the wording. Some guarantees carry a fixed expiry date, some renew automatically unless cancelled by a set date, and some are issued with no expiry at all ("evergreen"), remaining on foot until the beneficiary agrees to release them. Check the actual instrument, not just the lease summary.

How do I cancel a bank guarantee?

Generally, the beneficiary must confirm in writing that the underlying obligations have been satisfied and that the guarantee can be returned or released. That confirmation, together with the original instrument where required, is then provided to the bank so it can cancel the facility and release the customer's cash or property security. The exact process and forms are set by the issuing bank.

What happens if the original guarantee is lost?

Contact the issuing bank and the beneficiary promptly. Depending on the bank's process, a lost original may require a statutory declaration or indemnity before the facility can be cancelled or a replacement issued. Do not assume a lost original prevents a beneficiary from making a demand under wording it holds or has been shown.

Can a landlord refuse to release a bank guarantee?

A landlord, or other beneficiary, is generally only obliged to release the guarantee once the conditions in the lease or contract are met, such as payment of amounts owing and completion of make-good obligations. Disputes about whether those conditions are satisfied are common and may require advice on the lease and correspondence, rather than the bank guarantee wording alone.

Is a bank guarantee the same as a personal guarantee?

No. A bank guarantee is generally issued by a bank in favour of a beneficiary. A personal guarantee is a promise by an individual to meet another party's obligations if required. A transaction can involve both.

Can my home be at risk if I guarantee a loan?

Yes, particularly where the guarantee is supported by a mortgage or other security over the home. Even without direct security, enforcement of a substantial judgment may place assets at risk. Obtain advice on the actual documents.

Can I limit the amount I guarantee?

Sometimes a lender may agree to a capped guarantee, limited security or release conditions. The document must reflect any limitation clearly. Negotiation is not guaranteed and should occur before signing.

Can the same lawyer act for the borrower and guarantor?

Independent advice requires the lawyer to act for the guarantor's interests. Existing relationships and conflicts must be assessed. The firm may require separate representation.

Will the lawyer tell me whether the borrower can repay?

Legal advice explains the documents and legal risk. The guarantor must make their own inquiries about the borrower and should consider independent financial or accounting advice.

Can I cancel a personal guarantee after signing?

Release or withdrawal depends on the document, lender consent, debt and security position. Do not assume the guarantee ends when the original transaction changes or the relationship with the borrower ends.

What if I feel pressured to sign?

Tell the lawyer privately and do not sign. Moneysmart identifies pressure, threats, fear and lack of understanding as circumstances requiring immediate support and legal advice. Financial counselling and family-violence services may also be appropriate.

What if the lender has already demanded payment?

Obtain urgent advice and provide the demand, guarantee, loan documents and correspondence. Formal deadlines should not be ignored. The advice required is different from a pre-signing certificate appointment.

Final call to action

Understand the instrument, the fees, the secured obligations and the worst-case exposure before signing.

Book a guarantee consultation · Call (08) 9342 0837 · Request Vietnamese assistance

Our 24/7 enquiry service can collect basic information. Legal advice and any solicitor's certificate require conflict clearance, complete documents, a lawyer appointment and professional approval.

This page contains general information, not legal or financial advice. Guarantee documents, bank fee schedules, lender requirements and legal obligations vary and change. Contacting Legal Care Australia does not create a solicitor-client relationship. The firm must complete conflict checks and agree in writing to act. Do not send confidential financial documents until a secure channel is confirmed.

Bank guarantees: fees, legal risks and release