Welcomed Clarity for New York Commercial Landlords and Tenants: Court of Appeals Rules on “Good-Guy” Guaranties

The New York Court of Appeals’ recent decision in 1995 CAM LLC v. West Side Advisors LLC provides long-awaited guidance on how so-called “good-guy” guaranties [1] operate in commercial leasing. The question in this case was whether a guarantor’s liability ends when the tenant surrenders the premises to the landlord or the landlord accepts surrender of the premises. Historically, the “trick” to protecting landlords was to tie the “good-guy” guaranty directly to the lease provisions which required landlord acceptance of the lease surrender. This would ensure that the landlord retained control over when a surrender (and the guarantor’s release) became effective. However, here, the Court drew a clear line: if a guaranty states that guarantor liability ends when the tenant vacates and surrenders the premises, landlord acceptance of the surrender is not required – that is, unless the guaranty says so.

How this “Good Guy” Dispute Arose

The landlord leased office space in Manhattan under a commercial lease backed by a limited (“good-guy”) personal guaranty from the tenant’s principal officer. The tenant surrendered possession of the office space and considered its surrender complete upon providing notice, vacating the premises, and returning the keys, as required by the lease. The landlord never executed a written acceptance of that surrender, later suing the guarantor for rent accrued after the vacate date, taking the position that the guarantor remained liable until the landlord accepted the tenant’s surrender in writing.

The Court of Appeals disagreed, and enforced the guaranty as drafted. Because the guaranty didn’t explicitly provide that landlord approval was required, the Court found that the guarantor’s obligations ended once the tenant vacated and surrendered the space in accordance with the lease.

Implications for Landlords

Landlords who wish to extend guarantor liability must ensure that the guaranty explicitly conditions the guarantor’s release on the landlord’s acceptance of a surrender.

Key considerations for landlords include:

• Define “surrender”: Specify the required acts, such as notice, vacatur, key delivery, removal of all occupants and/or property, and payment of all sums due as of the date of vacatur.
• Align the lease and guaranty: Inconsistent definitions of surrender can create ambiguity that may otherwise be avoided.
• Audit forms and existing guaranties: Previously executed leases may expose landlords to unintended risk in the wake of this recent decision. Reviewing old leases and templates is necessary as many standard forms in circulation will no longer provide protection.

Implications for Tenants and Guarantors

A guarantor’s liability can now end without waiting for a landlord’s signature; however, the burden remains on the tenant to show full compliance with surrender conditions.

Key considerations for tenants and guarantors include:

• Confirm surrender conditions are satisfied.
• Maintain records, including notice given, vacatur timing, and returning of keys.
• Pay close attention to incorporation language: If all lease terms are incorporated by reference in the guaranty, a landlord-acceptance requirement may be inadvertently defined.

At its heart, the 1995 CAM LLC decision reinforces the basic truth that clarity in commercial leasing matters. When it comes to “good-guy” guaranties, industry custom is not the best protection – it’s careful drafting.

Sources:

• Decision: 1995 CAM LLC v. West Side Advisors, LLC :: 2025 :: New York Court of Appeals Decisions :: New York Case Law :: New York Law :: U.S. Law :: Justia
• Good Guy Guaranties (NY)
• Understanding Good-Guy Guaranties: What Every Landlord and Tenant Should Know | Farrell Fritz, P.C. – JDSupra
• Commercial Lease Guaranties- Legal Issues to Consider — New York Real Estate Lawyers Blog

[1] A “good-guy” guaranty is a limited guaranty commonly used in commercial leases. Under this type of guaranty, the guarantor, typically the tenant’s parent company, principal or another affiliated entity, remains liable for the tenant’s lease obligations so long as the tenant continues to occupy the space. If the tenant acts as a “good guy” by providing proper notice, paying all rent due through the surrender date, and returning the premises in good condition, the guarantor is released from further liability. Conversely, if the tenant fails to vacate following a lease default or termination, the guarantor’s liability continues.