Summary of the Legislation
The Legislation adds a new section 22-1005 to the Administrative Code of the city of New York (the Code), which prohibits the enforcement of guarantees and other “personal liability provisions” in “commercial leases or other rental agreements” involving real property and to which a business is a party as a tenant, subject to the two following conditions:
- The default or other trigger event occurred between March 7, 2020 and September 30, 2020.
- The tenant must satisfy one of the three following conditions:
- The tenant was required to cease serving patrons food or beverages for on-premises consumption, or to cease operations pursuant to Executive Order 202.3 (i.e., restaurants and bars).
- The tenant was a non-essential retail establishment subject to in-person limitations under state-issued guidance pursuant to Executive Order 202.6 (i.e., gyms, fitness centers, and movie theaters).
- The tenant was required to close to members of the public pursuant to Executive Order 202.7 (i.e., barber shops, hair salons, tattoo or piercing parlors, and related personal care services).
The Legislation also amends section 22-902 of the Code, which prohibits landlords from engaging in “commercial tenant harassment.” Landlords are now prohibited from “attempting to enforce a personal liability provision that the landlord knows or reasonably should know is not enforceable pursuant to section 22-1005 of the Code.” Landlords are also restricted from threatening a commercial tenant based on the commercial tenant’s status as a person or business impacted by COVID-19, or the commercial tenant’s receipt of a rent concession or forbearance for any rent owed during the COVID-19 period. Landlords will need to exercise caution when communicating with tenants to minimize the risk of claims of “commercial tenant harassment.”