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How COVID-19 Is Affecting Commercial Landlords & Tenants

NYC-based boutique law firm Pardalis & Nohavicka brings the latest legal updates from the world of real estate to PropertyShark. Pardalis & Nohavicka handles an eclectic array of matters, representing individuals and business owners in civil litigation, criminal cases and business transactions, currently litigating and representing clients throughout the United States and around the world.

The pandemic has upended the lives of business owners, retailers and landlords alike. However, the latest decisions from officials have given commercial landlords the short end of the stick — and may be cause for legal concerns.

Evictions Halted

New York state has halted all residential and commercial evictions until August 20. Gov. Cuomo also promised that New Yorkers would not be forced to leave their homes or businesses for being unable to pay rent during COVID-19. In the meantime, landlords will have to find a way to continue operating their properties with severely reduced operating cash.

During this moratorium, the state has also taken steps to ban any late-payment fees and allow renters to use their security deposits as payment (the security deposits would be repaid over time). In the interim, landlords may serve rent demands, but they are not allowed to move forward with eviction proceedings.

Personal Liability Bill

Last week, New York City Mayor, Bill de Blasio, signed the City Council’s Personal Liability Bill, which prohibits commercial landlords from enforcing personal guarantees on defaults that arose between March 7, 2020, and September 30, 2020. This measure provides a shield for businesses to protect their personal assets from landlords.

The suspension applies to businesses that were affected by mandated closures and service limitations in the Governor’s Executive Orders. Specifically, it covers:

  • Businesses that were required to stop serving food or beverages on-premises (restaurants and bars)
  • Businesses that were required to cease operations altogether (gyms, fitness centers, movie theaters)
  • Retail businesses that were required to close and/or subject to in-person restrictions
  • Businesses that were required to close to the public (barbershops, hair salons, tattoo or piercing parlors, and related personal care services)

While this new law only applies to a limited category of tenants/businesses, it dramatically limits the rights of commercial landlords, which becomes cause for legal concern. The law also interferes with private contracts and impedes on the contractual rights of landlords.

It’s important to note that personal liability provisions are often not included in the lease agreement themselves, but rather part of separate guaranties that are agreed upon and signed by the tenant.

About

Taso Pardalis is a founding partner of the Law Offices of Pardalis and Nohavicka, a leading full- service NYC law firm with offices in Manhattan, Queens and WeWork. Taso may be a well-known attorney with many cases making headlines in major media outlets, but at heart, he is a true entrepreneur that believes in supporting the small business community. His areas of concentration are: Intellectual Property, Trademarks, Corporate, Business Law and Real Estate Law.

Eliza Theiss

Eliza Theiss

Eliza Theiss is a senior writer reporting real estate trends in the US. Her work has been cited by CBS News, Curbed, The Los Angeles Times, and Forbes among others. With an academic background in journalism, Eliza has been covering real estate since 2012. Before joining PropertyShark, Eliza was an associate editor at Multi-Housing News and Commercial Property Executive. Eliza also writes for CommercialEdge. Reach her at [email protected]