Tenant’s Request for Buildout Delay Isn’t an Anticipatory Breach

August 24, 2021

What Happened: Under the terms of a 10-year restaurant lease, the obligation to pay rent didn’t kick in until the buildout was complete and the tenant began operating in the space. With work on the premises still to be done, the governor issued a COVID-19 shutdown order. Three months later, the tenant sent an email telling the landlord it wanted to delay the buildout and push back the rent commencement date by seven months.

What Happened: Under the terms of a 10-year restaurant lease, the obligation to pay rent didn’t kick in until the buildout was complete and the tenant began operating in the space. With work on the premises still to be done, the governor issued a COVID-19 shutdown order. Three months later, the tenant sent an email telling the landlord it wanted to delay the buildout and push back the rent commencement date by seven months. The landlord claimed that the tenant had repudiated the lease—in other words, was in “material anticipatory breach”—and sued to get out of the agreement and go after the guarantor.

Ruling: No dice, said the Michigan federal district court.

Reasoning: An anticipatory breach occurs when a contracting party unequivocally declares, before performance, through its words or actions, that it won’t perform. But that’s a tough thing to prove. The repudiating party’s acts must be voluntary and affirmative and make it “actually or apparently impossible” for the party to perform, the court explained. In this case, all the tenant did was ask for a delay. Moreover, its email included language expressing the tenant’s hope to salvage the project. “We still feel strongly about the opportunity,” it stated. This was far from the unequivocal declaration of non-performance required for anticipatory breach, the court concluded.

  • Encore Big Beaver LLC v. Uncle Julio’s of Fla., Inc., 2021 U.S. Dist. LEXIS 122386, 2021 WL 2682732

 

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