Court Strikes Down Guaranty Law
Originally Published : April 4, 2023
Dear HL Clients & Friends –
On Friday, April 1, 2023, Federal District Judge Ronnie Abrams issued a decision finding New York City’s Guaranty Law to be unconstitutional. We wish this were a badly timed April Fool’s Day joke, but sadly, it’s not.
Quick reminder: the City of New York passed Local Law 1932-A which sought to limit the personal liability of a guarantor to a commercial lease from March 7, 2020 to March 7, 2021. Shortly after the law was enacted, litigation ensued in the Southern District of New York challenging its constitutionality. Well, the Court has finally spoken and found that the law does in fact violate the Contracts Clause of the U.S. Constitution. In short, the Court held that while the meaning of the law, to provide relief to guarantors of leases due to the extraordinary effects of the pandemic, was well intentioned, the law itself was not reasonably tailored to accomplish its legitimate policy goals. As a consequence, the Court struck the law as unconstitutional.
What does the decision mean for you?
If you were a tenant that defaulted on your lease between March 7, 2020 and March 7, 2021, and you worked out a deal with Landy, odds are, you are in the clear.
However, if you abandoned your lease with money owed, relying on this now unconstitutional law to shield the defaulted lease’s guarantors from liability, you may be getting a call (or lawsuit) from Landy asking for that unpaid rent. Depending on your lease, it could be for the unpaid rent for the remaining term on the lease. If you fall into this category, please reach out to Hamutal Lieberman, Partner and Chair of the Litigation Group, to discuss your options. She and her team will review your lease and let you know if there is cause for concern. Even if you fall in the first category and just want to check out the deal you signed for peace of mind, you can call as well!
As always, we are here to help and support. Please do not hesitate to reach out with any questions or concerns.