Business successfully uses COVID as defense in court
FAIRFIELD — A Southport business successfully used the impact of COVID-19 as a defense in court after its landlord sought to terminate its lease.
“It started out as your run-of-the-mill landlordtenant commercial eviction case,” Aaron Romney, one of the lawyers for Wafu Asian Bistro, said.
Romney, a lawyer at Zeisler & Zeisler, P.C., said the Bridgeport Superior Court’s decision allowed the tenant to fully pay back the approximately $100,000 owed in rent. He said the impact of COVID-19 drove the court’s decision.
He said it stems from “equitable nonforfeiture,” which is part of old common law and has informed most state laws.
“What that doctrine says generally, in English, is if the tenant defaulted under a lease, and the landlord terminated, if the tenant can show that their actions were not willfull or grossly negligent, then the court can reinstate the lease under (the doctine),” Romney said.
Romney said it essentially means it is not fair to take away the tenant’s lease under these circumstances.
“A lease is very valuable to a business,” he said. “If you lose it, in many case you lose your business.”
Romney said the caveat is that is has long since been established that economic hardship does not constitute grounds for equitable nonforfeiture — being used if, hypothetically, a tenant made a mistake.
He said the court recognized that, distinguished this case from any other hardship pre-coronavirus and pointed to the fact that the pandemic caused hardship beyond the restaurant’s control.
“Non-specific to the tenant,” Romney said. “So, it’s not their bad luck. It was everyone’s bad luck.”
Romney pointed out that Gov. Ned Lamont’s executive orders prevented the restaurant from operating how they normally would since March.
“They were strictly takeout for a period. Then they could only have two tables. There were takeout service the entire time but much of today’s takeout is done through cell phone apps,” he said, noting Uber Eats was the largest of them. “Most customers don’t realize that when they’re paying for that food, Uber is taking 30 percent off the top.”
This means that, even if a restaurant is busy and doing a lot of deliveries, its bottom line is suffering, Romney said. He said the court factored that out to be hundreds of thousands of dollars year-over-year.
Prior to this case, Romney said, the restaurant and landlord Dawid Investments LLC had another dispute over common area maintenance fees — expenses other than the rent that the tenant is responsible for paying — when they received a large bill in February from 2019.
Romney said that issue was the result of his client not understanding where the large bill came from and wanted to understand and confirm it before paying it.
“That’s how the initial dispute between the landlord and tenant arose,” he said. “I don’t believe that ever made its way into court. But a notice to quit was served, which is what a landlord would give to a tenant to say ‘I’m terminating your lease.’”
The dispute was worked out, Romney said, and the tenant paid the fees to the landlord. When the coronavirus pandemic began, he said there was already some tension between the landlord and tenant.
“It explains why, in this day and age, when most landlords who had tenants that got behind would be thrilled to have their tenant pay them everything that was owed, reinstate the lease and continue doing business... this landlord did not want to accept full payment of all backed amounts due and allow the tenant to reinstate,” he said.
Romney said the court decided the landlord must reinstate the lease as long as the tenant paid what was due, which he said the tenant did on Dec. 10. He said the court was very clear that it was not disturbing the long-standing principle that economic hardship is not grounds for equitable nonforfeiture.
“It was distinguishing these circumstances from other types of economic hardship,” he said.
What is significant about the victory, Romney said, is that there are many other cases that this decision might be applied to.
“This case is the first Connecticut landlord case that acknowledges the impact of COVID-19 on otherwise well-established law,” he said. “It is likely this case will be cited in other landlord-tenant disputes during the pandemic.
“I would also go far as to say I would expect to see this decision in other cases that arose during the pandemic,” Romney said. “It’s speculation to a degree, but the principle of parties, lawyers and judges viewing commercial agreements that predated the pandemic under the lens of the pandemic is not specific to the landlord-tenant context. For example, it could extend to the insurance industry.”