We have considered appropriate lease terms to address energy efficiency improvements and the strategic effort to meet rising minimum energy standards through service charges and other means. We believe that there is a fair and balanced way to achieve this without relying on uncertain concepts. It will be interesting to see how this particular issue is dealt with by the higher courts in the future, as homeowners grapple with regulatory and market requirements to improve the energy efficiency of their buildings. CB Theater argued that the purpose of their movie lease, which they identified as operating a movie theater to screen new movies, was frustrated from the moment the Florida state government closed the theaters until the theater reopened. The court concluded that with respect to the period during which the cb Theatre was closed by order of the government, the object of the lease was in fact thwarted. CB Theater further argued that the lack of new film releases due to suspended film production, as well as consumer reluctance to return to the cinema, continued to thwart the purpose of the lease, even after the state government approved the reopening of reduced-capacity theaters. The court rejected this framing and pointed out that cb Theater could fulfill the purpose of the lease, since it was possible for cb Theater to operate a cinema after the partial reopening of capacity. Therefore, the court focused on whether the CB THEATRE could not be opened at all by order of the government. It granted relief to tenants under the frustration theory of the purpose of opening only for periods when CB Theater was prohibited by law, and not for times when CB Theater had the legal right to open but decided not to do so due to a reduced business environment. D`Amico Dry D.A.C.c. McInnis Cement Inc., No. 1:20-cv-03731-VEC (S.D.N.Y. Gap) argued that the pandemic: (i) constituted a “victim” under the lease; (ii) has thwarted the object of the lease or rendered impossible the performance of the parties; and (iii) gave rise to false statements.
Gap also argued that the lease should be reformed because the parties made a mutual mistake in not anticipating and fixing a possible pandemic in the lease. The lease allowed the tenant to reduce the rent after an accident while the landlord repaired the damage to the premises and allowed the tenant to terminate the lease if the damage could not be repaired. The Gap Court found that, under the terms of the lease, an accident is an event that causes physical damage to the property that can be repaired, and it is this damage and the landlord`s ability to repair the property or not that gives the tenant the right to reduce payments or terminate the lease. The court noted that the pandemic has not caused any physical damage to the premises that can be repaired. He argued that “it goes without saying that [the owners] are unable to carry out restoration work that could eliminate the pandemic or change government restrictions that restrict the operation of Gap.” The court found that no “accident” had occurred under the lease and that, therefore, Gap was not entitled to reduce the rent or terminate the lease on that basis. Those days are over. During the COVID-19 pandemic, we have witnessed national government regulations that have directly or indirectly led to temporary business closures on an unprecedented scale. Of course, for the large percentage of businesses that rented out their properties, the closures affected their ability to pay the rent. This was a new situation, and landlords and tenants looked at their leases to see how the terms — particularly the HSF, if there was one — met their situation. It is unlikely that the force majeure clause in your contract will explicitly refer to global pandemics such as COVID-19 as an excuse for performance. If a COVID-19 incident does not correspond to any of the specific force majeure incidents described in the contract, you may need to rely on the catch-all language of the clause to apologize for your performance.
In this case, Texas law has held that a party must not only prove that the incident in question falls within the collective language of the force majeure clause, but that the event in question was not foreseeable by the parties when they even accepted the contract. The judge found that allowing a rent reduction in the event of a pandemic represented a significant change in the relative business positions of the lease parties and was not justified. The judge relied heavily on the fact that, when the restrictions were announced, the government had also made arrangements to support tenants. These measures, which would likely come back, would have to be considered by the tenant during a future pandemic – not a new lease clause. Many commercial leases contain clear and absolute obligations to pay rent, and much of the litigation related to the COVID-19 pandemic has involved attempts by commercial tenants to change the clear meaning of their leases based on the pandemic, arguments of force majeure, and fair theories such as frustration with the goal. These efforts were largely unsuccessful, and the courts were generally unwilling to change the terms of the contract under such arguments and theories. The most recent and high-profile case of W H Smith`s lease extension – Westfield dealt with the pandemic clause requested by the tenants – but in circumstances where most of the clause was agreed – but not with their operation. These criteria of frustration with the doctrines of purpose and impossibility in a wide range of courts underscore the importance of negotiating a well-drafted commercial lease. While courts across the country have interpreted doctrines differently from the doctrines of frustration of purpose and impossibility, the wording of the underlying lease is generally of paramount importance. Whether you want to enforce a force majeure clause or invoke a common law defense, it is highly recommended that you work with a lawyer to assess your contractual rights and obligations. This section should not be construed as legal advice and is not a substitute for legal advice. The remedies and defenses discussed in this article depend on factual issues and turn to Texas contract law and analysis.
This means that no single plea or defence corresponds to all treaties. Talking to a lawyer about your contracts can help you limit your risks and more accurately assess your rights during this ever-changing COVID-19 pandemic. This is a very unique situation to which many courts react in different ways. More information on the appointment of a lawyer and on representation with limited scope can be found here. In a Chapter 11 bankruptcy filing in the U.S. Bankruptcy Court in the Southern District of Florida, CB Theater, a high-end movie theater operator, attempted to delay or apologize for rent payments due to government-ordered theater closures during the COVID-19 pandemic. CB Theater argued that the frustration of the goal and the doctrines of impossibility should excuse or delay their obligation to pay the rent under the lease. Roslyn Events Corp.c.
Ber Dur Realty Corp., No. 607968/2020 (N.Y. Sup. Ct. Nassau Cty. 2020) (Tenant files a declaratory action and prohibits the landlord from keeping the tenant in default with the commercial lease, arguing that the COVID-19 pandemic and New York City regulations triggered the force majeure clause and excused the rent payment obligations.) (08/05/2020 Complaint; 08/05/2020 Order of justification) The court rejected UMNV`s argument that the force majeure clause of the lease excluded the frustration of defending the object, noting that if the force majeure clause considered impossibility, it did not take into account the risk that performance might be possible while the object of the contract was completely thwarted. The court ultimately concluded that Caffé Nero`s obligation to pay the rent according to the doctrine of frustration had been fulfilled during the period during which the café could not serve food and beverages in the rented premises. Here, tenant Cole Haan, a shoe and accessories retailer, permanently left one of its storefronts in March 2020 and hadn`t paid rent since. Landlord 1600 Walnut Corporation attempted to recover the rent payments due. Cole Haan argued that his obligations under the lease had been fulfilled or otherwise limited under the doctrine of frustration of the objective. .
