In one of the first decisions of its kind in the State of New York since the inception of the COVID-19 Pandemic, Jeffrey L. Goldman and Scott F. Loffredo convinced the New York State Supreme Court on behalf of an owner to reject a commercial tenant’s claims of (i) frustration of purpose, (ii) impossibility, and (iii) unjust enrichment.
In particular, the tenant sought to compel the return of the funds already drawn down and to enjoin the owner from further drawing down any on the remaining letter of credit. The tenant argued that the parties had come to an oral agreement to terminate the lease, or alternatively that even if no such agreement existed, Governor Cuomo’s March 22, 2020 Executive Order prevented the tenant from using its event space as originally contemplated and therefore the lease was void.
The Supreme Court rejected tenant’s arguments finding tenant could not provide any written agreement to terminate as required by the parties’ lease and as a matter of law. Turning to the critical legal argument, the Court held that the specific terms of the lease “contemplated a scenario in which performance of the lease terms by plaintiff might become prohibited by a governmental order” and “…plaintiffs nevertheless attempted to unilaterally terminate the lease in a manner violative of the terms thereof”.
Accordingly, the Court held tenant’s argument of “impossibility/frustration of purpose” was without merit and that tenant was still liable to pay its arrears, as well as other amounts due under the lease for the balance of the lease term.
Read more about this important ruling in this article on The Real Deal