Good Guy Guarantees

The NYC Hospitality Alliance writes to inform you of an important court ruling that may have significant implications for restaurants, bars, nightclubs, and other businesses with an existing commercial lease, or those that may enter a new commercial lease in New York.

As anyone who has ever signed a commercial lease in New York knows, a “Good Guy Guarantee” is a type of guarantee that is often included in a lease to give a landlord extra security should the commercial tenant default on rent or not comply with other lease obligations.

These Good Guy Guarantees, guarantee payment of rent if, for the most part, the tenant is in possession of the premises. Once the tenant provides a required notice to the landlord as stated in the lease’s guarantee and meets other obligations, and the tenant then vacates the premise and turns in their keys (in other words, the guarantor makes sure the tenant is a “good guy” and properly gives up possession of the premises) the guarantors’ responsibility for the remainder of the lease term is generally over (even if the tenant remains off the hook under the lease). 

Unfortunately, a recent court ruling, which is now on appeal drastically changes this and puts guarantors in peril. Basically, the Court decided that the boilerplate language in the standard restaurant or storefront lease that controls over the Good Guy Guarantee rider, such that, even if the terms of the Good Guy Guarantee are met, the guarantor could still remain on the hook for the entire term of the lease. Obviously, if this court ruling stands, it will create a major disruption in commercial leasing. 

Before you enter a new lease or a renewal of a lease with a Good Guy Guarantee, we urge you to speak to your landlord-tenant lawyer about this issue so that additional language can be added or subtracted from the lease, or the Good Guy Guarantee, to overcome this Court's decision. 

To support restaurants, bars, and nightclubs affected by this court ruling, the NYC Hospitality Alliance is filing an Amicus Brief to educate the Court about the history of Good Guy Guarantees and about how important they are in commercial leasing, hoping to receive a more favorable ruling in the appeal.

We’ll keep you up to date on this important matter.