The landlord in 1140 Broadway LLC v Bold Food LLC, et. al., Sup. Ct., N.Y. Co. Index No. 652674/2020 commenced a Supreme Court action against a commercial tenant for breach of an office lease due to the tenant’s failure to pay rent during the COVID-19 pandemic and ultimately surrendering the lease almost a year and a half before its expiration date.

The tenant asserted in defense of the action for rent frustration of purpose and impossibility of performance based upon COVID-19.  In what we believe is the first summary judgment decision on those defenses in the commercial leasing context since the onset of the pandemic, Justice Arlene P. Bluth of the Supreme Court, New York County rejected the tenant’s defenses, granted judgment on the issue of liability in favor of the landlord and ordered a trial on the issue of damages.

In this commercial landlord-tenant case commenced in the Supreme Court, the plaintiff landlord sought rent and additional rent claiming that the defendant tenant leased a portion of the twelfth floor at plaintiff’s building in Manhattan as office space with a lease which was not to expire until February 2022 and that the tenant stopped paying rent in February 2020 and eventually vacated the space five months thereafter on June 30, 2020. In opposition, defendants cited the ongoing pandemic as the reason the tenant stopped paying rent. Defendants argued that performing under the lease was objectively impossible and, therefore, any default was excusable. Defendants also relied on the frustration of purpose doctrine to excuse the tenant’s failure to pay rent.

The Court concluded that the frustration of purpose doctrine did not apply where the tenant rented office space under a generic office lease, simply because the tenant’s industry experienced a precipitous downfall and the tenant was no longer able to pay the rent.

Similarly, the Court found the impossibility doctrine inapplicable holding that:

“Impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. Moreover, the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract.”

Daniels Norelli Cecere & Tavel, PC anticipates this case to be the first of many such cases which will be decided on this issue of the defenses of frustration of purpose and impossibility to the nonpayment of rent in a commercial lease. It is expected that every case will seek to distinguish itself based upon some unique facts. We will be following the cases closely and will keep you apprised of any significant developments.