In a decision dated November 25, 2020, the U.S. District Court for the Southern District of New York upheld the validity of three local laws enacted in response to the COVID-19 pandemic. The Local Laws are the “Home Harassment Act” (Local Law 56-2020, amending the Admin. Code Section 27-2004(a)(48)); the “Commercial Harassment Act” (Local Act No. 53-2020, amending the Admin. Code Section 22-902(a)(11)); and the so-called “Warranty Act”, (Local Act No. 55-2020, Addition of Admin. Code Section 22-1005 (“Personal Liability Provisions in Commercial Leases”) and Amendment of Admin. Code Section 22-902).The “harassment laws” prohibit harassment of residential and commercial tenants because they were affected by COVID-19. The Warranty Act provides in part as follows:

“A provision in a commercial lease…or [in another document] in respect of such rental agreement… which provided for one or more natural persons… to become liable, in whole or in part, on the occurrence of any default or other event for [amounts] owed by the tenant under such agreement… are not enforceable against such natural persons if the conditions of paragraphs 1 and 2 are met:

  1. The tenant meets the conditions of sub (a), (b) or (c):

(a) The renter was required to cease serving food or drink for consumption on site or to cease operation under Executive Order No. 202.3 issued by the Governor on March 16, 2020;

(b) the tenant was a non-essential retail fixture subject to personal restrictions under the direction of the New York State Department of Economic Development pursuant to Enforcement Order No. 202.6 issued by the Governor on March 18, 2020; or

(c) the tenant was required to close members of the public under Executive Order No. 202.7 issued by the Governor on March 19, 2020.

  1. The default or other event which would make such individuals personally liable in whole or in part for such obligation has occurred between March 7, 2020 and March 31, 2021.”

The Court ruled that the harassment laws do not imply the plaintiffs, who are landlords, that they have freedom of expression and do not violate their rights to a fair trial; they “do not prevent landlords from making routine rent demands” and “the laws are sufficiently clear about what constitutes harassment.” The Court also ruled that the Warranty Act does not conflict with the contract clause “…because the jurisprudence of this Circuit accords broad respect to the good faith efforts of policymakers to regulate in the interest of the public interest…” and “[i]It is not the Court’s role to rule on the wisdom of the decision to shift the economic impact of the pandemic from commercial tenants and their guarantors to landlords. Finally, the Court held that these local laws were not in effect because they did not conflict with state laws. Plaintiff’s claims have been dismissed. Melendez v. City of New York, 20-CV-5301, may be obtained at 2020 US Dist. LEXIS 222774.

Likewise, Judge Arlene P. Bluth of the New York County Supreme Court, in a decision dated Nov. 20, 2020, ruled that the “Guarantee Act” (Admin. Code Section 22-1005) does not violate the contract clause of the United State Constitution, that it applies to stand-alone personal guarantees for commercial leases, and that it applies not only to business started after its entry into force, but also to defaults from the start of the pandemic. The court dismissed a claim brought against the natural person who guarantees a commercial lease. 204 East 38e LLC v. Sons of Thunder LLC, 2020 NY Slip On 33862, was posted on:

http://www.nycourts.gov/reporter/pdfs/2020/2020_33862.pdf.

Judge Bluth also, in a November 20, 2020 ruling, relying on Admin. Code Section 22-1005, rejected claims against the natural person who guarantees a commercial lease. The court also dismissed the surety’s counterclaim for damages against the plaintiff arising out of the plaintiff’s refusal to withdraw its claims under Section 22-1005. “The immediate action did not constitute harassment as a matter of law.” 27 Morton, LP v. MDS Fashions, LTD, 2020 NY Slip On 33861, was posted on http://www.nycourts.gov/reporter/pdfs/2020/2020_33861.pdf.

However, in another case, also decided on Nov. 20, 2020, Judge Bluth approved the plaintiff’s cross-appeal for an injunction ordering a commercial tenant and his guarantor to repay the rent and pay additional rent during the duration of the action. The plaintiff alleged that, except for two months, the rent had not been paid since October 2019. Since the plaintiff did not request the eviction of the tenant “the present case does not violate any executive order” [and, therefore, the] [p]The claimant is permitted to … claim damages arising out of the tenant’s failure to pay the rent.” As for the defendant-guarantor, Admin. Code Section 22-1005 did not apply. “The default here occurred long before the envisioned time period” in that section. CP Associates LLC v. Concourse Family Dental, 2020 NY Slip On 33875, is posted on: http://www.nycourts.gov/reporter/pdfs/2020/2020_33875.pdf.

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