'Substantial Compliance' Saves COVID-Strapped Tenant from Nonpayment Eviction

April 21, 2021

What Happened: From March to October, a steakhouse couldn’t come up with its monthly rent because of the COVID-19 public health orders restricting indoor dining, the meat and potatoes of its business. But the steakhouse tried its best to be a faithful tenant. First, it asked for a rent abatement of at least 50 percent. The landlord ignored and later rejected the request. And when business improved in November, the steakhouse sent the landlord a check covering not only November but also the previous eight months plus interest and late fees.

What Happened: From March to October, a steakhouse couldn’t come up with its monthly rent because of the COVID-19 public health orders restricting indoor dining, the meat and potatoes of its business. But the steakhouse tried its best to be a faithful tenant. First, it asked for a rent abatement of at least 50 percent. The landlord ignored and later rejected the request. And when business improved in November, the steakhouse sent the landlord a check covering not only November but also the previous eight months plus interest and late fees. It also paid its December rent on time and in full. Even so, the landlord sued to evict the steakhouse for not paying March to October rent on time.

Ruling: The Pennsylvania state court dismissed the eviction claim.

Reasoning: There was no dispute that the steakhouse violated the lease. However, the so-called rule of “substantial compliance” protects tenants from forfeiture “when the contract has been carried out or its literal fulfillment has been prevented by oversight or uncontrollable circumstances.” Evicting the steakhouse in this case would amount to the kind of unacceptable forfeiture the substantial compliance rule is designed to prevent, the court reasoned:

  • While not an excuse, the COVID-19 shutdown orders significantly impaired its ability to pay rent;
  • The steakhouse made good faith efforts to carry out its obligations; and
  • It remedied its violations by paying all owed rent as soon as it could.

 

  • Chest-Pac Assocs., L.P. v. Del Frisco’s of Phila.: 2021 Phila. Ct. Com. Pl. LEXIS 4

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