City measure to bar landlords from targeting retailers’ assets could face legal challenge

Real estate attorneys point to unclear language in bill that suspends enforcement of personal liability provisions

New York /
May.May 22, 2020 07:00 AM
(Credit: Justin Sullivan/Getty Images)

(Credit: Justin Sullivan/Getty Images)

City legislation that temporarily bars landlords from going after restaurant and retailers’ personal assets may face another legal hurdle.

Last week, the City Council passed a bill that suspends the enforcement of personal liability provisions in commercial leases or rental agreements for a default that occurs between March 7 and Sept. 30.

The measure is aimed at shielding owners of restaurants, bars and nonessential retailers and businesses from financial ruin due to Covid-19. Under the bill, trying to enforce personal liability provisions is considered a form of harassment.

Mayor Bill de Blasio is expected to sign the bill into law next week.

But some opponents, and even some council members, have questioned the city’s authority to interfere in private contracts. Real estate attorneys have also pointed to the fact that personal liability provisions are typically included as a separate guaranty signed by the tenant — not as something embedded in a lease agreement. For this reason, the measure’s phrasing could open the door for legal challenges.

“Most guaranties are not provisions of leases at all, but are independent instruments that can be sued on separately,” said Maxwell Breed, a partner at Warshaw Burstein. “It doesn’t seem as if the bill accomplishes what it is trying to accomplish.”

A representative for Councilmember Carlina Rivera, the bill’s sponsor, didn’t immediately return a request seeking comment.

Patrick O’Sullivan, a partner with Herrick’s real estate department, said the Council possibly intended “rental agreements” to serve as a catchall for separate guaranties — though intention doesn’t preclude litigation.

“Is that an ‘other rental agreement’? I think that’s unclear,” he said. “Given the testimony, and what the Council is trying to accomplish, they were trying to get to these other documents.”

Write to Kathryn Brenzel at [email protected]


Related Articles

arrow_forward_ios
Office workers in major cities reach pandemic-best return rates
Office workers in major cities reach pandemic-best return rates
Office workers in major cities reach pandemic-best return rates
City approves mass timber, basement apartment rules
City approves mass timber, basement apartment rules
City approves mass timber, basement apartment rules
Downtown pols call for limits on permanent outdoor dining
Downtown pols call for limits on permanent outdoor dining
Downtown pols call for limits on permanent outdoor dining
Office tenants nationwide are touring buildings at record numbers for the pandemic (Getty)
Tenants rushing back to tour offices, but things still far from normal
Tenants rushing back to tour offices, but things still far from normal
The Grand Hyatt on 42nd Street and the New York Hilton on Sixth Ave are both planning on reopening later this year (Hilton, Hyatt)
Two Midtown hotels opt to reopen days after severance bill passes
Two Midtown hotels opt to reopen days after severance bill passes
(Getty)
Douglas Elliman mandates staff vaccination at offices nationwide
Douglas Elliman mandates staff vaccination at offices nationwide
Nearly 100K homes sold across UK in August ahead of tax break expiration
Nearly 100K homes sold across UK in August ahead of tax break expiration
Nearly 100K homes sold across UK in August ahead of tax break expiration
NYC City Council passes bill forcing hotels to dish out severance pay
NYC City Council passes bill forcing hotels to dish out severance pay
NYC City Council passes bill forcing hotels to dish out severance pay
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...