New York City Council COVID-19 Legislation Assisting Restaurants

The City Council took decisive, if temporary action this past week to assist the restaurant industry during the current COVID-19 pandemic. As reported here on April 15, 2020, the Council was considering capping third party delivery fees at 10% of the order. The final bill that passed modified that proposal under pressure from Grubhub and others. Third party providers cannot charge more than 5% for orders placed, and up to an additional 15% as a delivery charge. While more than the initially proposed 10% cap, it is less than the 30-40% that has been charged. Penalties for violations are steep, up to $1,000 per day.

The Council also sought to provide relief for restaurants that cannot afford rent during the current closure period, which is pretty much everyone. If a commercial tenant is in default in rent between March 7, 2020, and a specified date after the closure orders are lifted, a landlord cannot enforce any personal lease or rent guaranty for arrears during that period. There are also a number or anti-harassment measures enacted. The rules on personal guaranties leave open questions, and are not a long term solution. They do however give restaurants some breathing space and can be used as an entry point to negotiate with a landlord. How effective these rules will be remains uncertain, and they are likely to be challenged in court. We will continue to monitor these and other developments.