Restaurateurs like Bobby Flay were blindsided from the coronavirus lockdowns. Because of local mandates, many couldn't operate their businesses. So do restaurants and businesses that service restaurants (as in the Flay case) need to pay rent when they can't perform the business they rented the space for? That wouldn't seem fair, would it?
But if businesses forced to close can stop paying rent, this burden falls on the landlord, who simply rents space. It's not the landlord's fault there's no business. Find out what happened with Bobby Flay and whether this sets a COVID-19 precedent.
Background of the Flay case
In Bobby Flay's case, he rented office space in New York City under the hospitality group he founded, Bold Food. Because Bold Food was not earning revenue during mandatory restaurant shutdowns, the company stopped paying rent.
Bold Food simply vacated, not paying back rent while occupying the space. (The lease allowed this tenant to break the lease and not be responsible for future rent.) This dispute has become one of the first landlord-tenant office court cases regarding COVID-19.
The landlord in this case, 1140 Broadway LLC, sued Bold Food, LLC, for breach of lease. The lawsuit was asking for $380,000 in unpaid rent, damages, and fees. The landlord stated Flay's company stopped paying rent in February 2020 and then vacated the premises on June 30, 2020, using the space rent-free for five months. Flay's group argued that because the business couldn't operate due to the ''pandemic'' (not the reaction to the pandemic), his default was ''excusable.''
The judge, Hon. Arlene P. Bluth, ruled for the landlord. If you think about it, once you get over feeling how unfair this is to Bobby Flay's company, it's just as unfair to the landlord if they don't get paid.
Bluth determined that because the landlord provided the office space bargained for, and because the space didn't suffer damage or was no longer able to provide the function it was leased for (it was), Bold Food needed to pay the landlord as long as they were occupying the space. There was nothing in the lease specifying rent was contingent on the tenant being able to afford to pay it.
Another snag in the Flay case
The judge in the Flay case used one more argument to justify the ruling: Because Bold Food is not a restaurant but a consulting and assisting service for restaurants (helping restaurants with payroll, accounting, and human resources); Bold Food in essence is like a long-lost cousin -- once removed from the restaurant shutdown edict. Bold Food is in a different class as, say, Gato, Flay's NYC restaurant, is (or was).
Bobby Flay could sue, but not the landlord
There's no denying Bobby Flay was denied operating his business, a phenomenon that doesn't usually happen in America. The mandatory lockdowns, however, were not the fault of the landlord; they were ultimately the fault of the coronavirus, but you can't sue a virus. You can, however, sue the people responsible for the reaction to the virus, namely Gov. Andrew Cuomo and New York City Mayor Bill de Blasio.
Can you sue Gotham City?
So can you sue the city or state for shutting down your private business, effectively preventing you from making a living? Well, James Mermigis, a Long Island attorney, is doing just that, suing Gov. Cuomo and Mayor de Blasio on behalf of all small businesses the city and state has shut down. The cases are pending.
Not many argue with state governments being able to pass laws to protect the public health, but as we've witnessed, decisions on which businesses are shut down and which are allowed to remain open are often arbitrary. Plus, evidence is mounting that shutdowns don't do enough good to warrant their use, not to mention some of the very politicians who mandate shutdowns and shelter-in-place edicts often don't practice what they preach -- think Nancy Pelosi getting her hair done in San Francisco or California governor Gavin Newsom eating at a French restaurant.
The Millionacres bottom line
If the government takes away a business' livelihood, should they not be on the hook to help them out financially? The takeaway with this case is that for the time being at least, it's a victory for landlords.