COVID Shutdown Orders Don't Excuse Tenant's Failure to Pay Rent

What Happened: Stop me if you’ve heard this one before: A gym that had to shut down temporarily under the governor’s COVID-19 emergency orders stopped paying rent in March. The landlord couldn’t evict because of the state-wide moratorium on commercial evictions. But it could still sue the tenant for damages. And that’s what it did. The tenant claimed frustration of purpose and impossibility and asked the court to dismiss the case.

Ruling: The New York court rejected both defenses and allowed the landlord to proceed with its case.

Reasoning: The temporary shutdown order devastated the tenant’s business but didn’t frustrate the purpose of the lease, the court reasoned. The moratorium meant just that landlords couldn’t evict tenants for not paying rent; it didn’t extinguish tenants’ lease duty to do so. And there was no language in this particular lease excusing failure to pay rent. On the contrary, the lease stated that the tenant’s obligation to pay rent would not be excused if the landlord met all of its own obligations under the agreement.

As for impossibility, the court noted that the defense applies only in very narrow situations where it becomes “objectively impossible” for the tenant to perform, like when the leased property is completely destroyed. At most, the COVID-19 shutdown orders “temporarily hindered” the property by making it harder for tenants to use it to conduct business. And that’s not enough to invoke the impossibility doctrine, the court concluded.  

• Cab Bedford LLC v Equinox Bedford Ave, Inc.: 2020 N.Y. Misc. LEXIS 10861, 2020 NY Slip Op 34296(U)