Weir Greenblatt Pierce LLP partners Walter Weir, Jr. and Steven E. Angstreich secured a significant victory for their client in an action against a commercial tenant for breach of lease due to the tenant’s failure to pay rent during the COVID-19 pandemic. In granting summary judgment in favor of their client, the Superior Court of New Jersey rejected the tenant’s argument that the COVID-19 pandemic relieved the tenant of its obligation to pay rent under the doctrines of frustration of purpose and impracticability.
The action arose from the tenant’s breach of a 10-year commercial lease when it refused to pay rent claiming that the pandemic frustrated its purpose for entering the lease, and that it was unable to perform under the lease terms. The issues in the case involved questions of whether a party may cite the effects of the COVID-19 pandemic to void its obligations under a contract, and whether the contract itself included provisions that would allow a party to do so.
The tenant, who was a provider of medical services, alleged, among other things, that because the pandemic caused an increase in demand for remote services and a decrease in demand for in-person services, the agreement became less profitable and its primary purpose for entering the agreement had been frustrated. The tenant further alleged that performance became impracticable for the same reason and argued that it should no longer have to pay rent.
In granting summary judgment, the New Jersey Superior Court found that the lease clearly states that the premises would be used for “medical services” as provided by the tenant and included no language regarding contingencies. The Court also noted that the lease clearly indicated that any failure to pay rent would amount to a material breach of the agreement. The Court ultimately held that although the COVID-19 pandemic was an unforeseeable circumstance, “[n]o rational fact finder could find that the performance here was literally impossible or made inordinately more difficult by COVID-19, as the only performance required by Defendant tenant was to pay their rent.” The change in demand for in-person medical services, according to the Court, did not frustrate any purpose contemplated in the language of the agreement between the Parties, and did not render the tenant unable to perform its obligation to pay rent under the lease. Accordingly, the Court granted summary judgment in favor of the landlord.
The full Opinion may be read here.
