On Tuesday, May 26, 2020, Mayor DeBlasio signed Local Law 1932-A, which provides that personal guarantees of commercial New York City leases for non-essential businesses (which includes retail stores and restaurants) are unenforceable with respect to lease defaults which occur from March 7, 2020 through September 30, 2020.
Often when a business entity (such as a corporation) signs a lease for commercial space, the landlord will require that the individual owner(s) of the business personally guarantee the lease obligations. Thus, if the tenant defaults on rent or other payments due under the lease, the landlord can sue the individual owners personally for the moneys owed. Under Local Law 1932-A landlords will not be able to enforce personal lease guarantees if the lease default occurs during the period March 7 through September 30, 2020. While the new law will provide relief to business owners, its constitutionality has been called into question as it impairs validly executed agreements. It is therefore likely that the enforceability of Local Law 1932-A will be challenged, and it is an open issue as to whether the courts will uphold it.
If you have particular questions regarding commercial leases and lease guarantees please contact Stephen Goldstein at email@example.com, or at (646) 259-5024.