While New York State is in the process of lifting many COVID-19 related restrictions, the commercial eviction moratorium related to COVID-19 hardship is in effect through August 31, 2021
Protections for certain commercial lease guarantors, however, expired on June 30, 2021
These protections were initially put in place by the New York City Council under Local Law 55 of 2020 (“Guaranty Law”), prohibiting commercial landlords from enforcing personal guarantees against particular commercial tenants who defaulted on their leases from March 7, 2020, to September 30, 2021. Essentially, commercial landlords who were not receiving rent could not go after a tenant’s personal assets. These protections were extended to June 30, 2021 (Local Law 50 of 2021).
Protections Under Guaranty Law and its Extensions
Guaranty Law prohibited commercial landlords from enforcing personal guarantees of commercial leases to collect payment for rent, utilities, and certain other debts if the commercial tenants entirely or partially closed as a result of New York State’s orders to control the spread of COVID-19. (Executive Orders 202.3, 202.6, and 202.7.) The law categorized attempts to enforce such guarantees as an unlawful act of commercial tenant harassment.
Local Law 55 and its extensions protected commercial tenants who were req uired to cease serving patrons food/beverages for on-premises consumption or cease operation under Executive Order 202.3; tenants who were non-essential retail establishments subject to in-person limitations under the New York State Department of Economic Development’s guidance, pursuant to Executive Order 202.6; and tenants who were required to close to members of the public under Executive Order 202.7. Many bars, restaurants, retail establishments, and businesses such as gyms, spas, salons, barbers, and tattoo shops were affected. Expiration of Local Law 55 Of 2020 and its Extensions Landlords may enforce personal guarantees against the guarantors’ assets for defaults that occur after June 30, 2021. The plain language of the statutes suggests that defaults that occurred during the “Covered Period” (March 7, 2020, through June 30, 3031) remain unenforceable; however, it remains unclear whether this is the case. The courts will undoubtedly be issuing rulings clarifying this matter in the coming months.
If you are a commercial landlord or a tenant, please do not hesitate to call us at (718) 402-2240.