The ruling opens the door for NYC commercial landlords to recoup unpaid rent from personal guarantors.

By Sujata Yalamanchili, Erin Teske, and Dylan Weber

As it has with most every other aspect of leasing, the COVID-19 crisis has played havoc with landlords’ efforts to collect unpaid rent from tenants’ guarantors. And now as a second and more deadly surge of cases threatens further government shutdowns, landlords need to be aware of the key cases involving attempts to enforce lease guaranties that came down as a result of tenant COVID-related defaults during the first round of shutdowns last spring.

Now that most states have lifted their moratoria on commercial evictions, tenants strapped by COVID-19 losses are increasingly seeking refuge in bankruptcy courts. But while the automatic stay buys tenants some time to decide whether to reject their lease, tenants in bankruptcy still have to pay their rent within 60 days. At least, that’s how it works in normal times. But since the COVID-19 crisis began, bankruptcy courts have bent the rules to relieve tenants from their so-called post-petition rent obligations.