Signing a Commercial Lease in New York: Personal Guaranties, Defaults, and Yellowstone Injunctions

A commercial lease often runs for years, and much of the relationship is governed by what the lease and any guaranty say. Here are points business tenants and landlords should understand before signing—and what can happen if something goes wrong.

The Personal Guaranty: Read It as Closely as the Lease

When a business entity signs a lease, a landlord may ask an owner or principal to sign a personal guaranty as well. The guaranty is a separate promise, and its terms shape what the signer may be asked to pay. Before signing, ask:

• Which obligations does the guaranty cover—rent only, or every obligation under the lease?
• Is it capped at a dollar amount or a number of months, or is it open-ended?
• How long does it last, and does anything end it early, such as a surrender of the space?
• What happens to it if the lease is assigned, extended, or amended?

In New York City office and retail leasing, limited guaranties—sometimes called “good guy” guaranties—are a negotiated market practice. Terms vary widely, so what any particular guaranty covers depends on its wording.

When Rent Goes Unpaid: The 14-Day Demand

A nonpayment summary proceeding in New York rests on RPAPL § 711(2). The ground exists where the tenant “has defaulted in the payment of rent, pursuant to the agreement under which the premises are held, and a written demand of the rent has been made with at least fourteen days’ notice requiring, in the alternative, the payment of the rent, or the possession of the premises.” The demand must be served as RPAPL § 735 prescribes.

That differs from a holdover proceeding under § 711(1), where a tenant stays after the term ends. For a landlord, proper procedure and service matter; for a tenant, a rent demand is a signal to get advice promptly.

Notices to Cure and the Yellowstone Injunction

When a landlord claims a non-monetary default and serves a notice to cure, the lease may terminate if the cure period runs out. New York tenants have a long-standing tool for this situation, named for First National Stores, Inc. v. Yellowstone Shopping Center, Inc., 21 N.Y.2d 630 (1968). A Yellowstone injunction is a court order that pauses the cure period while the dispute is decided, so a tenant who loses on the merits may still have the chance to cure instead of losing the lease. Under the standard the Court of Appeals set out in Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Avenue Associates, 93 N.Y.2d 508 (1999), which appellate courts continue to apply, the tenant must show that:

1. it holds a commercial lease;
2. it received from the landlord a notice of default, a notice to cure, or a threat of termination of the lease;
3. it requested injunctive relief before the lease terminated; and
4. it is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises.

Timing is often decisive: once the lease has terminated, the opportunity may be gone. Lease language also matters: in 159 MP Corp. v. Redbridge Bedford, LLC, 33 N.Y.3d 353 (2019), the Court of Appeals, 4–3, enforced a negotiated commercial lease clause waiving the tenant’s right to bring declaratory-judgment actions, even though the waiver blocked Yellowstone relief. The Legislature responded in December 2019 with Real Property Law § 235-h, which makes a commercial lease provision waiving a tenant’s right to bring a declaratory judgment action about the lease “null and void as against public policy.” Other remedy-limiting clauses, and how § 235-h applies to a particular lease, still deserve a careful read.

Harassment Protections for NYC Commercial Tenants

New York City’s Administrative Code (Title 22, Chapter 9) prohibits commercial tenant harassment: conduct that would reasonably cause a commercial tenant to vacate, or to surrender or waive rights under its lease or applicable law, combined with specified acts such as threats, repeated interruptions of essential services, repeated frivolous court proceedings, or blocking access. Lawful lease enforcement—a lawful termination, a lawful refusal to renew, or a lawful reentry—is not harassment.

The NYC Commercial Rent Tax

As of October 2026, the NYC Department of Finance describes the Commercial Rent Tax this way:

As of October 2026, relief bills for certain retail and food-service tenants (A6580 and S10300) are pending in committee and have not been enacted. Confirm current figures with the Department of Finance and your tax adviser.

A Due-Diligence Checklist for Tenants and Landlords

A starting point, not a complete review:

• Use and zoning. Confirm the lease and local zoning both allow the intended use. Outside New York City, some uses need a special use permit or a variance from the town, village, or city where the property is located; New York City has its own Zoning Resolution.
• Assignment and subletting. Can the tenant assign or sublet, and on what conditions? Does a sale of the business count as an assignment?
• Repairs and maintenance. Who handles structural items, building systems, and code compliance?
• Common area maintenance (CAM) and pass-throughs. How are operating expenses and real estate taxes calculated and shared, and can the tenant audit them?
• Default and cure provisions. How long are the cure periods, and does the lease include waivers that could limit court relief?
• The parties. Landlords may want to confirm the tenant entity exists and is in good standing; see New York LLC publication and reporting rules.

How We Help

Rausa Russo Law reviews and negotiates commercial leases for landlords and tenants throughout New York State, and we handle commercial purchases and sales. Local practice and costs vary by county and region.

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