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Tenants Must Still Pay Rent Even Though they are Unable to Operate in the Premises Due to Government-Ordered Restrictions

The Second District Court of Appeal has spoken on one of the most litigated issues of the Covid 19 Pandemic: were tenants under commercial lease agreements whom the government ordered to shut down still nevertheless obligated to pay rent due under their lease agreements during the period the government required them to be closed for business? In Fitness International, LLC v. 93 FLRPT, the Second District Court of Appeal just answered the question affirmatively, at least with respect to the language in the particular lease at issue in the case.

In Fitness International, the tenant operated a fitness club at the premises owned by its landlord pursuant to a lease. On March 1, 2020, Florida's governor issued an executive order declaring a public health emergency in the State of Florida because of COVID-19. Between mid-March 2020 and mid-May 2020, various government orders required all fitness centers within the State of Florida to close to prevent the spread of COVID-19. From mid-May 2020 through mid-June 2020, fitness centers were authorized to reopen and operate at fifty percent capacity. The tenant in Fitness International closed its health club on the leased premises on March 17, 2020, and fully reopened the club on June 12, 2020 (the closure period). During the closure period, the tenant paid rent as required by the lease. In June 2021, the tenant asked its landlord to refund the rent tenant paid during the closure period. The landlord refused, and Tenant filed a lawsuit seeking declaratory relief that it was excused from paying rent during the closure period on the basis that: (a) the landlord breached the lease because it warranted that the tenant would have the right to operate a health club on the premises continuously throughout the term of the lease; (b) the force majeure clause excused tenant’s obligation to pay rent and (c) the doctrine of impossibility discharged tenant from paying the rent. The trial court and Second District Court of Appeal disagreed, rejecting all of the tenant’s arguments, and the Second District affirming summary judgment in the landlord’s favor.

First, the Second District explained that the landlord did not warrant or guarantee that the tenant would have the right to use the premises continuously as a health club despite government-mandated restrictions but rather landlord was required to provide the tenant only with possession of the premises in exchange for its payment of rent. The landlord was not obligated to ensure the tenant’s particular use of the premises.

Second, as to the force majeure argument, a force majeure clause excuses the performance of contractual obligations—either wholly or for the duration of the force majeure—upon the occurrence of a covered event that is beyond the control of either party to the contract. The court held that “government restrictive laws” did not create a “force majeure event” because they did not delay, hinder, or prevent the tenant from performing its rent obligation under the lease.

Third, the doctrine of impossibility of performance applies to discharge a party from performing a contractual obligation which is impossible to perform and the party neither assumed the risk of impossibility nor could have acted to prevent the event rendering the performance impossible. The court also found that the doctrine of impossibility of performance did not apply to excuse the tenant's rent obligation during the closure period because the tenant’s obligation to pay rent was not impossible but merely inconvenient, profitless, and expensive due to the government restrictions.

The important takeaway from this case is that the outcome could have been different had the Lease covenants contained different language. A well-drafted lease is critical to protect the rights of parties.

The defenses of breach of lease, force majeure, and the impossibility of performance are routinely raised (sometimes successfully) by commercial tenants as an excuse to pay rent due under their leases. Rosenthal Law Group routinely litigates these issues and can assist you with all of your commercial landlord-tenant matters.