How COVID-19 Changed Commercial Lease Disputes in NYC

Commercial real estate suffered significant losses in the wake of the COVID-19 pandemic. Tenants attempted to avoid obligations under their commercial leases by arguing force majeure and other legal principles. 

In response, commercial landlords have sought to enforce lease agreements by filing lawsuits. As the legal landscape continues to evolve in the years following the pandemic, Knox Law Group has been trusted by landlords across NYC in cases involving commercial lease disputes. 

Commercial Tenants Struggle To Pay Rent In The Immediate Aftermath Of The Pandemic

Across NYC, commercial tenants were among the hardest hit by the COVID-19 pandemic. Stay-at-home orders, the rapid spread of the illness, and a hesitancy to return to “normal” activities left businesses scrambling to pay their bills. 

A commonly encountered problem from the perspective of commercial landlords was this inability for their tenants to pay rent as agreed to. Tenants would frequently assert defenses for the failure to pay rent, which included:

• Impossibility 
• Failure of consideration
• Mutual mistake
• Casualty provisions within a lease 

These arguments, for the most part, have been unsuccessful. While there was no doubt that business declined due to the pandemic, opportunities for online sales persisted throughout the early days of COVID-19. Additionally, in-store shopping with abbreviated hours and contactless pick-up provided tenants with opportunities to make sales despite the hardships presented by the pandemic. 

Frustration Of Purpose Utilized As A Defense Of The Inability To Pay Rent

Rent in NYC is high for retailers. No matter the specific location within the city, tenants understand that paying rent is a challenge in the fast-paced market of NYC.

However, no tenant likely foresaw the challenges that the COVID-19 pandemic would present. With city officials instituting severe penalties for maintaining pre-pandemic store hours, the vast majority of retailers chose to close their locations. The need to close their stores was argued to be a frustration of purpose as well as an impossibility of performance. 

In short, these renters argued that the stay-at-home orders effectively made it impossible for them to satisfy their obligations under a lease. What many renters found was that courts chose to look instead at the force majeure clause, rather than considering either the frustration of purpose or impossibility of performance defenses.

When A Landlord Initiates The Lawsuit

The failure to pay rent, citing the pandemic, lack of foot traffic, and the harsh economic conditions, resulted in tenants not paying their rent. When a landlord attempts to terminate a lease, it may also call for an accelerated payment of rent. 

In response, retailers would frequently ask the court to issue an injunction —an order prohibiting further actions under the lease until the court could weigh in. The tenants would often assert that the lease was unenforceable and that the lease should, instead, be rescinded. 

Speak To Knox Law Group Today For Insights Into NYC Commercial Lease Disputes

Commercial landlords across NYC have come to trust Knox Law Group for its stellar representation in a variety of matters associated with lease disputes. To learn more about how we can assist you, please contact us today to schedule a complimentary consultation.