Commercial Tenant Not Excused from Paying Rent During State-Ordered Pandemic Store Closures

On January 7, 2021, Justice Borrok of the New York County Commercial Division issued a decision in Victoria's Secret Stores, LLC v. Herald Sq. Owner LLC, 2021 NY Slip Op. 50010(U), holding that a commercial tenant was not excused from paying rent during state-ordered pandemic store closures, explaining:

The Complaint is premised on the mistaken theory that the parties did not allocate the risk of tenant not being able to operate its business and that tenant is therefore somehow forgiven from its performance by virtue of a state law. This is contrary to the express allocation of these risks set forth in Paragraph 26 of the Lease Agreement, dated as of August 22, 2001, by and between Herald Square Owner LLC's predecessor-in-interest, as landlord, and Victoria's Secret Stores, LLC's predecessor-in-interest, as tenant, as amended. It is of no moment that the specific cause for the government law was not enumerated by the parties because the Lease as drafted is broad and encompasses what happened here — a state law that temporarily caused a closure of the tenant's business. The parties agreed that this would not relieve the tenant's obligation to pay rent. Thus, the Complaint must be dismissed in its entirety.

(Internal citations omitted).

We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.