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New York City Council Passes Suspension of Personal Guarantees for Certain Commercial Tenants

May 27, 2020

On May 26, 2020, New York City Mayor Bill de Blasio signed the City Council’s bill No.1932-A (the Personal Liability Bill). The Personal Liability Bill adds a new section 22-1005 to the administrative code of the City of New York, suspending the enforcement of personal liability provisions for certain commercial tenants affected by the COVID-19 crisis.

The Personal Liability Bill is limited to personal guarantees for natural persons that are triggered by defaults that occur between March 7, 2020 and September 30, 2020. The temporary suspension applies to only specific categories of commercial tenants:

• businesses that were required to stop serving food or beverages on-premises (i.e., restaurants and bars) under New York State Governor Andrew Cuomo’s Executive Order 202.3;
• retail businesses that were required to close and/or subject to in-person restrictions (i.e., gyms, fitness centers and movie theaters) under Governor Cuomo’s Executive Order 202.6; or
• businesses that were required to close to the public (i.e., barbershops, hair salons, tattoo or piercing parlors and related personal care services) under Governor Cuomo’s Executive Order 202.7.

We note that there is some ambiguity as to whether the suspension of enforcement applies to all personal liability arising between March 7, 2020 and September 30, 2020 or only to the payment obligations missed during such time period. The Personal Liability Bill also do not reconcile that personal liability provisions are often part of separate guarantees and not included as part of the lease itself.

We additionally note that the Personal Liability Bill may be challenged on constitutional grounds, such as whether the enactment of legislation that voids contractual obligations is a proper exercise of governmental police powers.

We will continue to monitor any challenges or amendments to the Personal Liability Bill. If you have any further questions, please contact Tarter Krinsky and Drogin’s COVID-19 response team at CV19team@tarterkrinsky.com.

Attorney Advertising. The information contained in this Legal Alert provides a general summary of the topics covered and is not intended to be and should not be relied upon as legal advice. You should consult with your legal counsel for advice and before making legal, business or other decisions.

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