COVID-19 Orders Not an Excuse for Business to Skip Rent, Connecticut Court Rules

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Connecticut’s Supreme Court ruled Tuesday that executive orders issued by Gov. Ned Lamont affecting restaurants during the COVID-19 pandemic could not not be used by a Norwalk eatery as an excuse not to pay the rent.

The court ruled against Downtown Soho LLC, the the operators of the Blackstone’s Bistro in Norwalk’s trendy SoNo district, upholding a lower court decision in favor of the landlord, AGW SoNo Partners. The owners had sued Downtown Soho for breach of contract after it failed to make lease payments between March and September 2020.

Lawyers for the upscale restaurant and bar had argued that the state’s public health emergency declared in March 2020 and subsequent executive orders banning dining in restaurants and later limiting capacity made it commercially impractical to operate the restaurant.

They argued they should not be made to pay rent, totaling more than $200,000, under a legal doctrine that allows for a lease to be breached when its terms become impossible or illegal to meet.

But Chief Justice Richard Robinson, writing for a unanimous court, found that “even under the most restrictive executive orders closing restaurants entirely to indoor dining, use of the premises for the purpose of operating a restaurant was not rendered impossible insofar as restaurants were permitted to provide curbside or takeout service.”

The case is among the first to address the national issue of how the pandemic affects the rights and responsibilities of commercial landlords and tenants, lawyers for both sides said.

“This was precedent setting,” said Philip Russell, an attorney for Downtown Soho. “The Connecticut Supreme Court has now said that the pandemic and the executive orders that followed did not frustrate the purpose of restaurant leases and did not make the performance of a restaurant’s business impossible.”

Andrew Nevas, an attorney for SoNo Partners, said the decision may extend beyond restaurants to any commercial lease agreement violated as the result of pandemic-related orders.

“Landlords still have to pay taxes, still have to pay a mortgage, still have to pay insurance, still have to pay maintenance,” he said. “I don’t think it matters whether it’s a restaurant or a bar or a retail place or a commercial office building, I think a lot of the principals in this case are going to apply going forward.”

The Blackstone Bistro was completely closed between March 11 and May 27, 2020, before reopening under less restrictive executive orders, first with only outdoor seating, later adding indoor dining with capacity significantly reduced because of social-distancing requirements.

The operators of the restaurant testified that they tried to operate takeout service, but it was not profitable. They also unsuccessfully argued that relying on takeout was inconsistent with the wording of the lease, which stipulated the building would be used for a “first-class restaurant.” Prior to the pandemic, the bistro would generate a bill of $100 to $200 per patron, given bar service and dishes priced on average between $35 and $60 each, according to court documents.

The governor had issued a series of orders that first closed restaurants and bars to in-person business through May 20, 2020, then restricted restaurants to outdoor dining and on premises alcohol consumption through June 16, 2020, and then allowed restaurants to resume indoor dining only at 50% capacity.

“There was no impediment to actual performance here,” Nevas argued before the court. “They were open for six months without paying rent.”

Russell argued during trial that the restrictions put in place by the executive orders meant that, at best, it was able to continue operating for a time at a loss. The restaurant and bar left that location in September, 2020.

The ruling sends the case back to the lower court to reconsider damages.

Copyright 2022 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Topics
Legislation
COVID-19
Connecticut

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