Eviction Moratorium Doesn't Get Guarantor of Defaulting Tenant Off the Hook

February 18, 2021

What Happened: Like so many tenants affected by COVID-19, Saks Fifth Avenue stopped paying rent at its flagship New York City store. The landlord sued Saks’ parent company, the lease guarantor, for $2.7 million in unpaid rent. If these were normal times, we’d be liable for the tenant’s default, the guarantor acknowledged. But given the “unprecedented circumstances” of the pandemic, we didn’t breach the guaranty, it argued.

What Happened: Like so many tenants affected by COVID-19, Saks Fifth Avenue stopped paying rent at its flagship New York City store. The landlord sued Saks’ parent company, the lease guarantor, for $2.7 million in unpaid rent. If these were normal times, we’d be liable for the tenant’s default, the guarantor acknowledged. But given the “unprecedented circumstances” of the pandemic, we didn’t breach the guaranty, it argued. It also cited the Governor’s Executive Order (EO) temporarily barring evictions against tenants who can’t pay rent due to COVID-19.   

Ruling: The New York court ruled that the landlord had a valid claim against the guarantor and refused to dismiss the case.

Reasoning: The EO placed a temporary moratorium on eviction “of any residential or commercial tenant [facing financial hardship due to the COVID-19 pandemic] for nonpayment of rent.” But the court noted that this wasn’t an eviction suit, but a claim asserting rights under a guaranty in connection with a commercial tenancy. And neither the EO nor other COVID-19 orders go so far as banning those kinds of actions. Sure, times are tough for commercial tenants, the court concluded, but guarantors of defaulting tenants still have to make good on their obligations under the guaranty unless and until the governor or legislature states otherwise.

  • 135 E. 57th St., LLC v. Saks Inc.: 2021 N.Y. Misc. LEXIS 371

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