The NYC Guaranty Law Was Declared Unconstitutional.
A federal judge ruled that a Covid-era provision from March 7, 2020 through June 30, 2021 for retail renters is unconstitutional, siding with commercial landlords.
The judgment presents a chance for landlords whose tenants fell behind on their rent due to the outbreak.
A city ordinance that didn’t allow landlords from seizing tenants’ personal assets in order to recoup unpaid rent was in question. It had been passed two months into the pandemic. Many people argued that it was against the Contract Clause of the U.S. Constitution, which forbids governments from passing laws that interfere with private contracts.
The initial request to dismiss that case was successful for the city. As was the case during the pandemic. Judge Ronnie Abrams concluded that case law accorded “substantial deference” to decision-makers working in the public interest.
A positive decision was reached in an appeal by landlords in October 2021. The court found numerous “serious concerns” and sent the matter back to Judge Abrams. The guarantee provision did not uphold the public interest in a reasonable manner as required by the contract clause.
The city was not able to demonstrate that the guarantee statute “is reasonably tailored to accomplish its legitimate policy goals”. Abrams’ said in his decision on the last day of March. The state case, which was brought by various landlords was unsuccessful on appeal.
The decision is a major victory for commercial landlords whose tenants defaulted on their rent from March 2020 to June 2021. As well as those whose leases held them personally accountable for that debt.
Those landlords may now be able to pursue the assets of those renters.
The ruling was hailed by the Real Estate Board of New York as setting a new standard for commercial real estate.