Executive orders issued by Gov. Andrew Cuomo in the wake of the COVID-19 pandemic have already put restraints on landlords in their ability to evict tenants for non-payment of rent. A bill signed by New York City Mayor Bill de Blasio on May 26 would extend those types of restraints to prohibit “commercial tenant harassment” and Lease Guaranty Enforcement from March 7, 2020 to September 30, 2020.  The local law is entitled “Personal Liability Provisions of Leases for Commercial Tenants Impacted by COVID-19.”

Commercial Tenant Harassment

Under the recently enacted local law, passed by the New York City Council by a vote of 44-6, landlords are prohibited from any act or omission that would constitute commercial tenant harassment and cause a tenant to vacate space or waive its rights as articulated in a lease or rental agreement. The protections are not limited to retail businesses.

As defined by the bill, commercial tenant harassment includes:

• Use of force or implied threats of force;
• Repeated interruptions of essential services (e.g., turning off heat or air-conditioning or other utilities);
• Commencing frivolous court proceedings;
• Removing the tenant’s personal property;
• Locking out a tenant;
• Interfering with business thru unnecessary repairs or construction;
• Unreasonable failure to cooperate with the tenant;
• Trying to enforce a personal liability that landlord knows or should know is not enforceable

Lease Guarantor Enforcement Temporary Moratorium

The New York City law extends to commercial leases where the guarantor liability arises from a tenant default or other trigger in the period of March 7, 2020 to Sept. 30, 2020. The protections are available only to natural persons (as opposed to a corporate or limited liability company guarantors).

The law applies in the situation where the tenant (whose obligations the guarantor guaranteed):

• was required to cease operations per Governor Cuomo’s Executive Order 202.3 (applies to restaurants, bars, gyms, casinos and movie theaters, effective 3/16/2020);
• or is a non-essential retail establishment per Executive Order 202.6; or closed to the public per Executive Order 202.7, applying to barbershops, hair salons, tattoo or piercing parlors and related personal care services including nail technicians, cosmetologists and estheticians and the provision of electrolysis, laser hair removal services.

The law may face legal challenges, either from individual landlords or landlord associations such as REBNY.  Such challenges may include arguments that the local law violates the contracts clause of the U.S. Constitution, to wit:  “No State shall . . . pass any. . . Law impairing the Obligations of Contracts.”  U.S. Const. art.I, §10, cl.1.

Attorneys in the Harris Beach Commercial Real Estate Practice Group continue to follow developments in the law and New York executive orders very closely. Earlier legal alerts include analyses of evictions and foreclosure provisions under Executive Order 202.28 and considerations in landlord-tenant relationships.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Visit our COVID-19 response page for additional resources related to the pandemic.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.