Top Questions About Otso Guarantees
Otso is a financial services company that provides AA-rated guarantees as an option for Landlords and Tenants to replace cash or letters of credit as security deposits in a commercial lease. We cover office, retail and industrial properties in the United States with a focus on Texas markets.
Our guarantees serve both parties in a lease (Tenant and Landlord) more effectively than cash or letters of credit. With our program, businesses get to retain and invest valuable capital for their business instead of locking it up for years in a deposit or letter of credit. Landlords enjoy increased coverages against defaults along with the strength and comfort of AA-rated credit that covers everything in their lease. Otso is truly a better way to lease commercial properties.
While Otso is the provider of the policy, every guarantee we write is backed by our financial partner, Euler Hermes. Euler Hermes has over 135 years of operations and billions of dollars in paid claims for their trade insurance program. You can read more about Euler Hermes here.
We cover every instance of default a Landlord’s commercial lease does. Monetary, non-monetary, damage considerations and more are all covered.
Our guarantee, an agreement between Tenant, Landlord and Otso, becomes an exhibit to the new lease. Language in the lease itself is outlined in the exhibit being used in lieu of whatever the standard deposit provisions normally used. In an existing lease, a short amendment is used to revise the language appropriately in situations where a deposit is being returned to a Tenant.
The number one benefit is not having to put up valuable cash or lock up that same capital in a letter of credit for the life of a lease. With Otso, we underwrite the performance of the Tenant so the Landlord is comfortable (and has strong protection against default scenarios) but without needing the Tenant to inject capital in a deposit.
Beyond the obvious benefits of being able to streamline deals by not requiring a deposit and marketing a building “deposit-free,” our guarantees allow for an increase (usually 3X) in coverage against defaults so Landlords actually improve their position against risks in a deal.
Pretty simple. Landlords sign up for free and once on-boarded they will be given a secure link in our portal for prospects and tenants to apply for every building they enter into the program. A Tenant can apply in about five minutes through our encrypted online application.
Every application provides a financial report (including banking history) at no charge to the Landlord. Most approvals of up to $50,000 happen same-day and generating the guarantees is all done via DocuSign to make the process smooth at lease execution.
Tenants are guaranteeing good lease performance. Our guarantees point to the Lease as supporting documentation. If the Landlord believes a default has occurred in line with the lease, a claim can be made for up to the full amount of the guarantee. We reimburse Landlords within thirty (30) days or less in a verified claim. If we pay out in a default scenario, we will seek restitution from the Tenant directly. You can read or download a sample guarantee here.
Landlords pay Otso directly for the guarantees. The typical fee for our guarantee is based on creditworthiness and ranges from $5-$10/month for every $1,000 we guarantee. This fee is usually passed along in the base rent to the Tenant as a “deposit waiver fee.”
For same-day approvals, we can cover up to $50,000 per business/lease. Guarantee amounts larger than $50,000 are available with our manual underwriting process which usually takes 48-72 hours.
No. If the Tenant otherwise performed in their lease without default there is no obligation to pay back the amount guaranteed. This also means there is no liability on the books. At the end of a lease, the guarantee simply ends. During a lease, we can assign or modify the guarantees as required if material changes are needed/requested by the Tenant and Landlord and mutually agreed upon.
We recommend the company seeking the guarantee has at least one (1) year of operations and at least the amount of the sought guarantee in cash at the time of application. An active DUNS number is also required, which is free and can be obtained directly from Dun and Bradstreet. You can learn more here.
Otso helps you get your deals done faster. Whether you are representing a Landlord or a Tenant, the current security deposit system is slow, poor at assessing creditworthiness, and really fails to work for anyone.
Just visit our Broker page to get started and connect us with your client. We’re happy to chat with businesses, landlords or anyone who has questions.