A recent New York Appellate Division (1st Dept.) alerted me to the fact that, under New York law , a tenant’s guarantor is more liable under a lease than the tenant itself. I Bldg Inc. v. Hong Mei Cheung, 2016 NY Slip Op 01587 (March 8, 2016) refers to prior law holding that a guarantor cannot assert a defense potentially available to the tenant unless the defense constitutes “a failure of consideration”. In this case, the court holds that even if the tenant could have raised as a defense the landlord’s unreasonable withholding of consent to a sublease, a guarantor could not. I found this rather shocking and assume other practioners will too. In light of this rule a guarantor would be well served to include in the guaranty a statement that the guarantor is entitled to the benefit of any defense, other than insolvency related defenses, that would be available to the tenant. Thank you to David Rosenberg of Marcus, Rosenberg and Diamond for bringing this case to my attention.
Commercial Tenant Notes 