In the case of SVAP II Pasadena Crossroads LLC v. Fitness International LLC, the court ruled on issues regarding unpaid rent and the impact of the COVID-19 pandemic on commercial lease agreements. Under Maryland law, it was determined that unpaid accrued rent belongs to the landlord at the time of accrual, unless otherwise stated in the agreement.
The court also considered whether the COVID-19 pandemic and subsequent business shutdowns made performance under a commercial lease legally impossible. It was found that this is dependent on the terms of the lease and the specifics of each case. In this instance, the court ruled that the tenant’s failure to pay rent was not excused by the pandemic as the lease contained a force majeure clause, which allocated the risk of business disruption to the tenant.
The landlord was also found not to have breached the lease provision that gave the tenant the right to use the premises for the operation of a health club and fitness facility, as the temporary closure of the tenant’s business was due to government orders, not the landlord’s actions. Furthermore, the COVID-19 pandemic was not considered a “casualty” allowing for abatement of rent.
Numerous cases have been filed by commercial tenants as a result of non-payment of rent during government ordered shutdowns during the pandemic, with mixed results for tenants.
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