NYC Guaranty Law Struck Down As Unconstitutional

by | Mar 31, 2023 | Industry Updates

On August 2, 2022, R&E Members Gary M. Rosenberg wrote in their New York Law Journal column: “By reason of the dispositive motion currently pending in Melendez, owners should prepare for the possibility that any COVID-related commercial rent arrears claims they may have written off as uncollectible due to the combination of an undercapitalized tenant entity and the Guaranty Law may spring back to life in the foreseeable future.”

The “foreseeable future” has now arrived.

In a highly anticipated decision issued on March 31, 2023, United States District Judge Ronnie Abrams held that New York City’s Guaranty Law — which rendered personal guaranties associated with certain commercial leases for the period from March 7, 2020 through June 30, 2021 unenforceable — violates the United States Constitution’s Contracts Clause. Click here to read the decision.

As a result, to the extent New York City owners retain claims for unpaid sums under such personal guaranties, those claims are now viable and may be pursued in the courts.

Notably, R&E Special Counsel Jeffrey Turkel contributed to this historic win by submitting amicus briefs in support of the owners’ position on behalf of RSA and CHIP at both the District Court and Second Circuit.

If you have any questions about the decision and whether you believe you have personal guaranty claims that you would like to pursue, please feel free to contact your trusted Rosenberg & Estis, P.C. attorney, who authored the above. Alex will send a more comprehensive update on the impact of this decision next week.