On October 24, 2023, the Appellate Division, First Department, held that a lease guarantor could not be found liable for use and occupancy charges that accumulate after the end of a lease term unless the foregoing was specifically covered in the guaranty. This decision by the First Department will have a substantial effect on both commercial lease and guaranty negotiations.
The Court's Decision in Archives, LLC v. Volpe
In Archives, L.L.C., v. Volpe, 2023 N.Y. Slip Op. 05354 (1st Dep't 2023), the First Department affirmed a lower court order that granted a defendant-guarantor's motion for partial summary judgment dismissing the complaint against the defendant-guarantor for unpaid use and occupancy charges that had accrued after the expiration of the lease.
The court held that the defendant-guarantor was not liable for use and occupancy charges accruing after the lease expired because the guaranty did not specifically cover the tenant holding over. While the lease itself contained a payment provision that covered use and occupancy of the premises by a tenant after the expiration of the lease, the First Department noted that such a provision was insufficient to hold the defendant-guarantor liable for payments stemming from a tenant's post-lease expiration use and occupancy.
The court's holding in Archives, L.L.C. v. Volpe will have a significant impact on both commercial lease and guaranty negotiations, and the effect of Archives on such negotiations should be discussed with an attorney.
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