Reed Smith Client Alerts

On May 26, 2020, New York City Mayor Bill de Blasio signed into law NYC Council Int. No. 1932-A (the Legislation), amending the New York City Administrative Code to provide greater protections for commercial tenants affected by the COVID-19 pandemic. The Legislation purports to temporarily prohibit the enforcement of “personal liability provisions” in “commercial leases or other rental agreements” involving a COVID-19 impacted tenant and broaden the scope of what constitutes “commercial tenant harassment” during the COVID-19 period.

Authors: Crystal G. Persaud

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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:

  1. The default or other trigger event occurred between March 7, 2020 and September 30, 2020.
  2. The tenant must satisfy one of the three following conditions:
    1. 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).
    2. 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).
    3. 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.”