SVAP III Poway Crossings, LLC. v. Fitness International LLC.
Facts: A commercial tenant and the landlord enter into a lease agreement with a force majeure provision applicable only when the tenant’s failure to perform cannot be cured by the payment of money. The tenant ceases paying rent after an executive order based on the COVID-19 pandemic temporarily closes their business operations. The tenant was able to pay rent and they occupied the premises throughout the pandemic. The landlord seeks payment of delinquent rent, late charges and attorney fees.
Claim: The tenant claims they are excused from paying rent for the period the executive order closed their business since the COVID-19 pandemic constituted a force majeure event temporarily frustrating the purpose for occupying the premises.
Counterclaim: The landlord claims the tenant is obligated to pay rent since the tenant continued to occupy the premises and the force majeure provision is only operative when the tenant cannot pay the rent bargained for in exchange for occupancy, not for the right to operate a particular business.
Holding: A California appeals court holds the landlord is entitled to collect delinquent rent, late charges and attorney’s fees from the tenant since the purpose of the agreement was for the tenant to pay rent to the landlord in exchange for the right to occupy the premises, and the force majeure provision only applies when the default cannot be resolved by the payment of money. [SVAP III Poway Crossings, LLC v. Fitness International, Inc. (2023) 87 CA5th 882]
SVAP III Poway Crossings, LLC. v. Fitness International LLC.
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Real Estate Economics: Factor 25: Pandemic
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Word of the Week: Force Majeure
