Just before Thanksgiving, a series of decisions were issued relevant to guarantors of commercial leases in New York City, and the landlords who seek to enforce those guarantee agreements.
In May 2020, the New York City Council enacted the Administrative Code of the City of New York § 22-1005, which bars the entry of a judgment against personal guarantors, under certain circumstances for the period from March 7th, 2020 to March 31st, 2021.
We are now beginning to see the first series of decisions on the enforceability of that amendment to the city code. In Melendez et al v. The City of NY, et al, index number 20-CV-5301(RA), three landlords challenged the constitutionality of the Amendment to the City Code, in Federal court.
The court found that the Administrative Code of the City of NY § 22-1005 was constitutional, right after stating that:
“The court thus concludes that the Guarantee Law is reasonable, necessary, and passed to advance a legitimate public interest. For this reason, despite his showing a substantial impairment, the plaintiff has failed to plausibly plead a contract clause violation here.”
Meanwhile, in State Court, the Honorable Arlene P. Bluth ruled on two cases, November 20, 2020. In each of those two cases, the court dismissed the landlord’s claim for a judgment for rent owed during those periods pursuant to the Administrative Code of the City of NY § 22-1005.
Those two cases respectively are, 27 Morton, LP v. MDS Fashions, LTD, index number 155681/2020, and 204 East 38th LLC v. Sons of Thunder LLC, index number 155933/2020.
These decisions are relevant to both commercial landlords and guarantors of commercial leases. Early on, prior to any appeal of any of these decisions which may or may not be successful, the Administrative Code of the City of NY § 22-1005, appears to be enforceable.
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