No rent abatement during shutdown

The Hugo Boss store at Columbus Circle. Image Credit: Google Maps.

Hugo Boss store at Columbus Circle which was forced to close by COVID-19 executive order sought rent relief. Hugo Boss operates a retail store in The Shops at Columbus Circle in New York City. A/R Retail LLC is the landlord for this luxury indoor mall. Hugo Boss entered into a 13-year lease at the location as a way to gain visibility in the heavily trafficked location catering to premium market customers. Hugo Boss’s rent was $692,026.07 per month.

Governor Andrew Cuomo, in March 2020 at the beginning of the COVID-19 crisis, issued Executive Order 202.5 ordering retail shopping malls to close their doors. Though closed, Hugo Boss paid rent for the month of April 2020. Hugo Boss notified A/R Retail that it expected its rent to be abated while the mall was closed and asserted that the lease’s force majeure provision applied. A/R Retail refused to reduce the rent and stated that Hugo Boss could exercise its right under the lease to terminate. Hugo Boss re-opened in September 2020 but suffered a 76 percent decrease in its sales when compared to September 2019’s sales. Hugo Boss continued to operate its store despite not having paid its rent.

A/R Retail sued Hugo Boss for current and past rent and attorneys’ fees. Hugo Boss defended by claiming rescission or reformation of the lease either because of frustration of purpose or impossibility of performance, and that the lease was terminated because of COVID-19. Hugo Boss also sought a recovery of rent paid for the time that it could not operate its store.

A/R Retail moved for summary judgment. Supreme Court Justice Joel Cohen ruled in favor of A/R Retail and ordered Hugo Boss to pay the rent. Judge Cohen found that Hugo Boss was still able to operate its store despite the shutdown and none of the provisions of the lease cited by Hugo Boss related to the COVID-19 executive order. The one right that the lease provided, termination, had not been invoked by Hugo Boss. It was too late for Hugo Boss to reform the lease. Its reformation claim was time-barred as the claim expired in 2018, six years after the lease was made. Nor was the store untenantable as Hugo Boss argued. Premises become “untenantable” through physical damage, which was not the case here. The store was also not destroyed by fire or other hazards rendering it unusable, thus, Hugo Boss could not recover using this section of the lease defining ‘hazard’ either.

A/R Retail LLC v. Hugo Boss Retail, 149 N.Y.S.3d 808 (Sup. Ct. N.Y. Cnty. 2021).

By: Harini Maragh (Harini is a New York Law School graduate, Class of 2022).


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