Thomas Kearns Publishes Article in NYREJ on Implications of the Good Guy Guaranty Decision

New York Real Estate Journal recently published an article authored by Olshan Real Estate Of Counsel Thomas Kearns entitled “Implications of the Good Guy Guaranty Decision.” In the article, Tom examined the practical implications of New York's Court of Appeals ruling in 1995 CAM LLC v. West Side Advisors, LLC, where a "good guy guaranty" conflicts with the lease it guarantees, the terms of the guaranty control. Tom explained that while the decision reinforced the guarantor's expectation that liability was capped upon peaceable surrender, the tenant entity remained fully bound by the lease's damage provisions , which warranted scrutiny in light of New York's rule against unenforceable penalty clauses under 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass'n. To address these risks, Tom recommended that landlords expressly incorporate the surrender rights permitted under the good guy guaranty into the lease itself, helping avoid future disputes over tenant liability following surrender. He also noted that landlords should carefully structure rent acceleration clauses, including meaningful present value discounts and offsets tied to fair market rental value, and consider arbitration mechanisms to reduce litigation risk and improve efficiency. Tom wrote “By having an express cross reference, the landlord avoids a creative tenant’s lawyer from trying to convince a trial level court that the 1995 CAM decision means that the tenant has the right to surrender without being liable for damages.” “Given New York case law, landlords should proceed carefully in integrating the good guy guaranty with the lease itself and the commercial real estate bar should consider updating longstanding damage clauses to make the result fairer and more efficient,” Tom concluded.