THE “GUARANTY LAW,” ENACTED BY THE NYC COUNCIL DURING COVID, DID NOT VIOLATE THE CONTRACTS CLAUSE OF THE U.S. CONSTITUTION (DISAGREEING WITH THE SOUTHERN DISTRICT); THE GUARANTY LAW PRECLUDED THE ENFORCEMENT OF PERSONAL LIABILITY GUARANTIES OF CERTAIN COMMERCIAL LEASES FOR 16 MONTHS (FIRST DEPT)

The First Department, in a full-fledged opinion by Justice Rosado, over a dissenting opinion, determined the “guaranty law,” enacted during COVID, did not violate the Contracts Clause of the US Constitution:

This case calls on us to determine the constitutionality of New York City Administrative Code § 22-1005, commonly referred to as the “guaranty law.” Enacted by the New York City Council in the early stages of the COVID-19 pandemic, the guaranty law precluded the enforcement of personal liability guaranties of certain commercial leases for a statutorily prescribed 16-month period. Principally, we are asked to decide whether this law, which the City Council passed as a means of mitigating the economic fallout of the public health crisis and to help small business owners avoid personal bankruptcy, impermissibly impairs existing contractual obligations in violation of the Contracts Clause of article I, section 10 of the United States Constitution. … [W]e conclude that the guaranty law does not violate the Contracts Clause.

[Overview of the facts:]

… [T]he landlord entered into a lease agreement with the tenant to rent the lower level of its building … for a 10-year term expiring on August 31, 2025. As principal of the tenant, a gallery that conducts shows for artists and sells artwork, the guarantor signed a “good guy” guaranty, agreeing to personally guaranty the tenant’s obligations under the lease. …

In March 2020, the tenant stopped paying rent, and by email dated November 1, 2020, the guarantor informed the landlord that the tenant intended to surrender the space back to the landlord on November 30, 2020. The tenant agreed to forfeit the security deposit to “settle up,” and by email dated December 7, 2020, the guarantor informed the landlord that the tenant had closed the gallery and returned the keys that day.

The landlord commenced this action against the tenant and the guarantor, asserting causes of action for (1) breach of lease, (2) breach of guaranty, (3) attorneys’ fees under the guaranty, and (4) attorneys’ fees under the lease. The landlord sought to enforce the lease and personal guaranty … . 513 W. 26th Realty LLC v George Billis Galleries, Inc., 2026 NY Slip Op 06058, First Dept 10-20-26