Both New York State and New York City continue to make changes to the law to deal with the impact of COVID-19.
On May 26, 2020, the Administrative Code of the City of New York was amended by Bill 1932-A. This is an amendment to Chapter 10 of Title 22 of the Administrative Code of the City of New York and adds language to Section 22-1005.
The new amendment protects the guarantors of commercial leases. The Bill would temporarily prohibit the enforcement of a personal liability provision in commercial leases or rental agreements involving a COVID-19 impacted tenant.
This would apply to businesses that were impacted by mandatory closures or limitations under the Executive Orders signed in March 2020.
There are three categories of individuals that the amendment applies to:
- Tenants who were required to seat patrons, serving food or beverage for on-premises consumption.
- A nonessential retail establishment subject to in-person limitations.
- Tenants who are required to close to members of the public under Executive Order 202.7 issued on March 19, 2020.
If the tenant falls into one of these broad categories, the amendment applies. If it applies, any defaults that occurred between March 7th and September 30th of this year should be excused temporarily.
The Commercial Tenant Harassment law was also amended to add the act of attempting to enforce a personal liability provision that the landlord knows or should reasonably know is not enforceable pursuant to Section 22-1005 of this Code.
It’s early to know where and when this will apply. Obviously, there is not a lot of litigation on the subject at this time. Going forward, landlords and tenants are likely to argue about:
- when this applies;
- what type of businesses this applies to; and
- how much of the liability is excused?
Time will tell what happens concerning the enforcement of guarantee agreements for tenants who were impacted by COVID-19.
Jordi Fernandez Law, P.C.
420 Lexington Avenue, Suite 2920
New York, NY 10170