Federal Court Upholds Personal Guaranty Law

By NYC Hospitality Alliance

We are pleased to report that a federal judge for the Southern District of New York has thrown out a lawsuit brought by landlords challenging the personal guarantee law.

This law, which we believe is the first in the nation, was passed in May to ensure that small business owners who were forced to close or limit their businesses due to COVID-19 restrictions do not face additional financial ruin on account of personal lease guarantees that were signed long before the pandemic.  

In upholding the law, Judge Ronnie Abrams rejected the landlords' argument that the personal guarantee law violates a provision of the Constitution that limits the ways in which the government may regulate private contracts. The judge analyzed legal precedent from the United States Supreme Court and other appellate courts to find that the New York City Council's passage of the personal guarantee law in response to the extraordinary circumstances created by the COVID-19 emergency did not violate the Constitution.

The judge also upheld two other laws that the landlords had challenged, which were passed at the same time as the personal guarantee law and geared towards protecting tenants impacted by COVID from landlord harassment. 

The personal guarantee law was passed with the enthusiastic support of the City Council and Mayor de Blasio. We want to thank the City for vigorously defending this extremely important public policy measure in federal court, Speaker Corey Johnson for his hard work ensuring its passage, and Councilmember Carlina Rivera, whose words of support were quoted on the judge's decision, and whose sponsorship of the bill is greatly appreciated.

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