Coopersmith and Coopersmith

New York State recently enacted the New York Forward Loan Fund (NYFLF) which is designed to assist businesses and landlords through COVID-19.  The New York City Council enacted Int 1932-2020 “COVID-19 Relief Package – Personal liability provisions of leases for commercial tenants impacted by COVID-19” in order to protect commercial tenants, which is scheduled to be signed into law today on Tuesday, May 26th.

Though both have laudable goals, the actions of New York State and the New York City Council are likely fall short of their intentions.

New York Forward Loan Fund

The New York Forward Loan Fund will be open today, Tuesday, May 26th at noon.  In order to qualify, a business must not have received a loan from the Small Business Administration (SBA) through either the Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL). 

Businesses, including non-profits, must have twenty (20) or fewer full-time equivalent employees and less than $3 Million in gross revenues per year.  $100 Million has been initially allocated towards the fund with 30% ($30 Million) for New York City and 18% ($18 Million) for Long Island.  The amount of the loan cannot exceed $100,000.

The benefits of these loans are as follows:

  • Non-recourse
  • No application fee
  • No prepayment penalty
  • Fixed interest rate of 3%

However, unlike PPP loans NYFLF loans are not forgivable.  NYFLF loans must be used for working capital and other purposes in furtherance of the business, but cannot be used to refinance an existing loan.  The term of the loan is five (5) years with interest only payments for the first twelve (12) months and payments of principal and interest for the remaining forty eight (48) months. 

The loan program explicitly includes landlords as prospective applicants.  However, landlords cannot have more than 200 residential units under ownership with no single property having greater than 50 units.  The properties must either be located in a low or moderate income (LMI) census tract or meet a rent test where property rents are affordable to tenants of low and moderate income.

These criteria alone disqualify commercial landlords and most residential landlords, though there may be reasons for small businesses and non-profits to apply for the program. 

More information can be found at:

Personal liability provisions of leases for commercial tenants impacted by COVID-19

Also on May 26th, New York City Mayor Bill de Blasio is scheduled to sign Int 1932-2020 COVID-19 Relief Package – Personal liability provisions of leases for commercial tenants impacted by COVID-19.

The text of the legislation is designed to eliminate personal liability of commercial leases under certain circumstances.  In order to make a guaranty unenforceable, the business must meet one of the following three criteria:

  • Required to cease on-premise consumption of food or beverages or cease operations pursuant to the Governor’s Executive Order 202.3 (March 16, 2020), which includes restaurants and bars;
  • Considered non-essential retail establishments subject to in-person limitations under guidance issued by Empire State Development pursuant to the Governor’s Executive Order 202.6 (March 18, 2020); and
  • Required to close to the public pursuant to Executive Order 202.7 (March 19, 2020), which includes hair salons, barbershops and tattoo parlors.

More specifically, the legislation states that it pertains to a “provision in a commercial lease or other rental agreement” that provides for “one or more natural persons who are not the tenant” where they may become personally liable for “rent, utilities, taxes or maintenance fees.”  In the event a lease default occurs between March 7, 2020 and September 30, 2020 the legislation seeks to make such guaranty unenforceable.

While the protections for personal guarantors are readily apparent, what is unclear is the constitutionality of the legislation.  This legislation will likely face significant legal challenges once enacted, only leading to more confusion.  Text of the legislation may be found at:

If you would like to discuss your specific circumstances and how they may be impacted by the foregoing, please feel free to contact us here or by calling us at (212) 625-8505.

Leave a Reply

Your email address will not be published. Required fields are marked *