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New York's Commercial Lease Defenses to Paying Rent
New York is in one of its worst depressions since the American Revolution. Few landlords and commercial tenants have been completely immune from the governmentally imposed economic shutdown and COVID-19's wrath. Not including what may have been negotiated in a commercial lease, there are three traditional theories under which commercial tenants could seek to assert entitlement to forgiveness of their rent: frustration of purpose, impossibility of performance, and force majeure.
One of our partners recently participated in a lecture with two other judges where one of the judges announced that the courts would be kept very busy while these tenant weapons were litigated. That may be true but the reality from the past precedents since its first use in New York during World War II and recently, from the decisions coming down from the state supreme courts is that their ability to terminate a lease or vitiate the payment of rent will occur in very, very, few cases.
|Frustration of Purpose
Formally defined, the doctrine of frustration of purpose applies when a change in circumstances makes one party's performance virtually worthless to the other, thereby frustrating the purpose in making the contract. PPF Safeguard, LLC v. BCR Safeguard Holding, LLC, 85 A.D.3d 506 (1st Dept. 2011). What this means in real world terms is that regardless of fault, if circumstances arise in which there is (for at least one side) no purpose to the contract, that side's performance is excused.
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