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Guarantor Liability for Post-Window-Period Rent
In a case of first impression, the Appellate Division, First Department recently addressed a split in the decisions of the lower courts as to the scope of the New York City Guaranty Law, Administrative Code §22–1005 (Guaranty Law). In Tamar Equities Corp. v. Signature Barbershop 33 Inc., No. 1153, 2024 WL 39739 (App. Div. 1st Dept. Jan. 4, 2024), the Appellate Division analyzed whether the Guaranty Law bars recovery from a guarantor where a commercial tenant's default initially arose during the Guaranty Law's window period of March 7, 2020 to June 30, 2021 (the Window Period), but persisted after the expiration of the Window Period. Holding that landlords may pursue claims for periods outside the Window Period regardless of the date of initial default, the Court unanimously reversed the trial court's dismissal of the landlord's action against a guarantor of a barbershop lease. Until this decision, some trial courts held that post-Window Period obligations were recoverable, while others held that the guaranty was rendered a nullity.
In Tamar Equities, the commercial tenant defaulted in its payment of rent in March, 2020, when Governor Cuomo's Executive Order 202.7 required that barbershops close due to the COVID-19 pandemic. The tenant, Signature Barbershop 33 Inc. (Barbershop), thereafter moved out of the subject premises in September, 2020, with approximately nine years remaining of the term of its lease.
In January, 2021, the landlord rented the space to a new tenant whose monthly rent was lower than the rent in Barbershop's lease. After the expiration of the Window Period under the Guaranty Law, the landlord sued Barbershop and its individual guarantor for damages equal to the deficiency in rent that was accruing on a monthly basis. In compliance with the Guaranty Law, the complaint only sought damages against the guarantor from July, 2021 onward.
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