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COVID-19 Real Estate: Mass Court on Commercial Tenant s Obligation to Pay Rent
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Friday, February 26, 2021
Commercial tenants who are unable to pay their rent as a result of COVID-19 shutdown and capacity-limit orders have, thus far, found little relief from courts, who have by and large rejected their common law defenses seeking a discharge of lease obligations. One recent Massachusetts case, however, sides with a commercial tenant, albeit under narrow circumstances, approving of the often-unsuccessful “frustration of purpose” defense.
In
UMNV 205-207 Newbury, LLC v. Caffé Nero Americas Inc., pending in Massachusetts Superior Court, the defendant tenant Caffé Nero could not make its rent payments after Massachusetts Governor Charlie Baker barred all restaurants in Massachusetts from allowing on-premises dining. In a lawsuit for damages filed by landlord UMNV, Caffé Nero argued that its rental payment obligations should be discharged under the “frustration of purpose” doctrine, which excuses a party from performing contractual obligation
Highlights
In its Business Litigation Session, the Massachusetts Superior Court granted partial summary judgment in favor of a commercial tenant café, holding that its payment obligations were discharged for the period of time when on-premises consumption of food and beverages was prohibited due to Gov. Charlie Baker s COVID-19 orders.
Relying on an express lease provision limiting the tenant s use of the premises to the operation of a café, and interpreting the lease as not allocating the risk of a global viral pandemic coming to Massachusetts and leading to a government order shutting down the entire restaurant industry, the court held that the tenant s performance was excused by the common-law defense of frustration of purpose.
Thursday, February 18, 2021
During the COVID-19 pandemic, many retail tenants have been affected by governmental orders prohibiting or limiting their business operations. Tenants seeking rent relief under their leases have raised various defenses to their obligations to pay rent, consisting of the common law doctrines of impossibility of performance, frustration of purpose, or the application of force majeure clauses in their leases.
This month, a Superior Court judge, in the case of
UMNV 205-207 Newbury, LLC v. Caffé Nero Americas, Inc., issued the first court ruling in Massachusetts addressing a tenant’s defense to the obligation to pay rent during a government-ordered shutdown. The court ruled that Caffé Nero’s obligation to pay rent was discharged under the doctrine of frustration of purpose, while the restaurant was barred from allowing customers to drink or eat inside its premises from March 24 to June 22, 2020, by the Governor’s Order prohibiting “on-p
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