A New York appellate court recently ruled in the case of 62 Wooster, LLC v. TML N.Y. Inc., concerning a lease dispute that arose during the COVID-19 pandemic. The decision, issued on October 1, 2026, impacts landlords and tenants navigating the complexities of lease agreements during unprecedented times. The case focused on whether individual guarantors could be held liable for unpaid rent after a tenant vacated the premises due to pandemic-related closures.

The court's decision is significant because it clarifies the obligations of guarantors in lease agreements, especially in light of the unique circumstances posed by the pandemic. It highlights the importance of clear language in contracts and the potential consequences when ambiguities exist.

Background

The dispute arose between 62 Wooster, LLC, the landlord, and TML N.Y. Inc., the tenant, regarding a retail store lease for a property located at 476 Broome Street in Manhattan. The individual defendants, Mark Wiltzer and Hiroyuki Sasaki, executed personal guaranties for the lease. These guaranties promised that the individuals would cover the tenant's obligations if the tenant defaulted.

The lease was initially set to run through June 2025. However, the tenant was forced to close its business on March 22, 2020, due to the COVID-19 pandemic. Subsequently, the tenant notified the landlord on September 15, 2020, of its intent to vacate the premises by September 30, 2020. The tenant surrendered the property on that date, returning the keys to the landlord's agent and ensuring the premises were clean and free of occupants.

Following the tenant's departure, 62 Wooster, LLC, filed a lawsuit against TML N.Y. Inc. and the guarantors, claiming they were responsible for unpaid rent from July 2021 through October 2021, totaling $307,577.08, as well as liquidated damages based on the difference between the agreed rent and the rent collected after reletting the space.

The Ruling

The Appellate Division of the Supreme Court of the State of New York ruled in favor of the guarantors, affirming a lower court's decision to dismiss several claims against them. The court found that the language in the guaranties created ambiguity regarding the guarantors' liability. The court stated, "the surrender clause and the good guy clause create ambiguity and irreconcilable conflict."

Judge Moulton and the other justices noted that the surrender clause in the guaranties clearly stated that the guarantors would not be liable for any obligations after the tenant had physically vacated the premises. Given that the tenant had properly surrendered the property on September 30, 2020, the court concluded that the guarantors' liability ended on that date.

In contrast, the good guy clause, which typically holds guarantors responsible until certain conditions are met, did not apply in this case because the tenant had failed to meet two of the three conditions outlined in that clause. The court ultimately ruled that the ambiguity in the guaranties favored the guarantors, leading to the dismissal of the claims against them.

Impact

This ruling carries important implications for landlords and tenants, particularly in the wake of the COVID-19 pandemic. It underscores the necessity for clear and unambiguous language in lease agreements and guaranties. As many businesses continue to face challenges stemming from the pandemic, this decision may influence how future lease disputes are handled, especially regarding tenant obligations and guarantor liabilities.

The ruling also illustrates how courts may interpret contractual ambiguities in favor of the party that did not draft the agreement. This principle, known as "contra proferentem," is crucial in legal disputes where language can be interpreted in multiple ways. Landlords may need to reevaluate their lease agreements and ensure that they clearly outline the responsibilities of both tenants and guarantors to avoid similar disputes in the future.

What's Next

While this ruling is significant, it is not necessarily the end of the matter for the parties involved. The decision can potentially be appealed to a higher court, although details on any pending appeals were not available in the court filing. Additionally, similar cases may arise as more tenants and landlords navigate the aftermath of the pandemic and its impact on lease agreements.