New Law Suspends Some Personal Guarantees of Commercial Rents
New York City has adopted legislation intended to temporarily bar commercial landlords from enforcing personal guarantees of certain commercial leases. The law applies to defaults in payment of rent, utilities, or taxes due for the period from March 7 through September 30, 2020, under commercial leases of premises where the tenant was required to cease in-person service of food or beverages, limit retail operations, or close to the public as the result of the Executive Orders promulgated during the coronavirus pandemic. Where it applies, the law prohibits the landlord from enforcing any lease or rental agreement provision providing for a guarantee by any natural person who is not the tenant, and defines any attempt to enforce such a provision as a type of unlawful “commercial tenant harassment.”
This local law has a narrower scope than other proposed legislation that, in some versions, would have granted relief to any tenant or guarantor “affected” by the virus pandemic. However, it remains possible that additional legislation will be adopted in the future. There are technical issues surrounding the drafting of the new law that may lead to disputes about its scope, and its constitutionality is sure to be challenged in court. Landlords, tenants, and guarantors who may be affected should discuss the new law with their counsel.