By Cristina L. Addy, Goulston & Storrs PC
Editor’s note: Legal Corner contains case summaries and analysis of recent court decisions that impact retail leasing and lease administration. These summaries focus on the leasing issues covered in each case and do not include detailed discussions or analysis of the procedural and peripheral issues in the cases.
Victoria’s Secret Stores, LLC v. New WTC Retail Owner, LLC, Supreme Court, New York County, 2020 N.Y. Slip Op. 50916(U),2020 WL 4743367 (August 12, 2020).
Landlord and a retailer entered into a lease in March, 2015 for space in a shopping center in New York. The shopping center was under construction at lease execution, but the lease stated that the shopping center grand opening was expected to occur in October 2015. The lease was for a 10-year term and stated that “landlord shall endeavor to give tenant at least two hundred seventy (270) days prior notice…of the date landlord reasonably anticipates the delivery date will occur.” Such reasonably anticipated delivery date is defined as the estimated delivery date. The lease also provides for automatic termination if the delivery date does not occur within eighteen (18) months from the estimated delivery date.
In October of 2019, the tenant had not received an estimated delivery date from landlord and sued to terminate or rescind the lease alleging that landlord breached the lease by failing to provide an estimated delivery date, failing to perform landlord’s work, and failing to deliver the premises. Landlord argued that tenant’s action should be dismissed because there was no cause of action for breach of contract since the lease did not include deadlines for setting an estimated delivery date, performance of landlord’s work or delivery of the premises.
The court held that tenant’s action should not be dismissed. The lease contemplated a 9-month delay between execution and delivery of the premises; 4 years after lease execution, landlord was unable to give tenant an estimated delivery date and the court found that tenant sufficiently established that such delay was unreasonable. Even if a contract does not contain fixed dates to satisfy obligations, the party required to perform must do so within a reasonable time.
Landlord argued that tenant’s breach of contract claim should be dismissed because the lease stated that landlord shall not “be liable for damages…as a result of any failure to make the Premises available within the time and/or in the condition provided in this Lease” and that failure to make the premises available “would not rescind or terminate the Lease…”.
The court determined that the language applied to actual delivery, not setting an estimated delivery date. Tenant’s breach of contract claim was not only based on failure to deliver, but also on landlord’s failure to set an estimated delivery date. The court reasoned that setting the estimated delivery date was significant because it provided business-planning information to tenant and starts the 18-month clock for delivery of the premises. For these reasons, the court determined that tenant’s breach of contract claim should not be dismissed.
The court dismissed tenant’s second claim that the propose of the lease was frustrated by extended construction-related delays. The frustration-of-purpose doctrine is not available when the event that prevents performance is foreseeable. The court determined that although the parties may not have foreseen the extent of the delays, the parties foresaw the possibility of delays in completion of construction.