The New York City Council has barred landlords from enforcing personal guarantees on defaults by restaurants, bars and certain other establishments through June 30 due to Covid-related restrictions. Landlords have appealed a decision by a U.S. District Court judge in Manhattan that upheld the law.
The law retroactively strips landlords "of their primary security and contractual remedy in the event of a default," opponents of the law said in a February court filing in the case, now before the Second U.S. Circuit Court of Appeals in New York.
Gabriel Stulman, owner of eight Manhattan restaurants and a bar before the pandemic, who pushed for the relief, said he was able to settle his disputes with his landlords, but the moratorium didn't erase back rent. About 75 employees now work at his three operating restaurants, down from 250 before the pandemic.
"I'm fully aware of what we've lost," Mr. Stulman said. "But I have a roof over my head and I'm grateful for it."
Annelise Lonidier, a yoga-studio operator in Atlanta, had personally guaranteed two years of lease payments totaling more than $100,000 on one of her two locations. She shut down one studio last summer and her landlord eventually released her from the guarantee. In exchange, she paid two of five months of back rent she owed and surrendered the computers, sound system and other contents of the studio.
Ms. Lonidier now offers yoga classes online and still operates one Sacred Thread Yoga studio. She sold the home she bought eight years ago and then purchased a smaller house outside the city, reducing her mortgage payment by half. "I don't think I would have been able to make it without that," she said.
Evan Ursitti opened the Verona, a live-music venue in New Port Richey, Fla., in 2018, using $12,000 of his own savings and $12,000 raised from local supporters.
After the pandemic hit, Mr. Ursitti drained his savings, sold off 11 of his 12 motorcycles and took a part-time job at a sign shop. He said he paid nearly all of his bills, but couldn't cover the Verona's $2,650 monthly rent.
The Verona's landlord began eviction proceedings this year after Mr. Ursitti turned down an offer to catch up on six months of unpaid rent by adding $1,000 to his monthly payments and extending the lease by a year, he said. Even after reopening, the Verona's revenue remains 40% below pre-pandemic levels, he said.
Mr. Ursitti hopes to pull through with the help of a government aid program for live venues and a GoFundMe campaign, but he worries that his personal guarantee could make him responsible for $23,000 in missed rent.
"That's something I think about every day when I wake up," he said. "It's a very scary thing."
Write to Ruth Simon at ruth.simon@wsj.com and Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
04-04-21 1322ET
