With retailers looking for ways to get out of their leases through “impossibility of performance” and the doctrine of “frustration,” top lawyers say that it will not work. On a recent edition of TRD talks, panelists had the following to say:
Jonathan Mechanic, chairman of Fried Frank’s real estate department said that “the courts have said that frustration of purpose is really more nuanced in terms of the circumstances where it would come into play. If you applied that to every circumstance today by virtue of the pandemic, then no one’s paying rent. And obviously the result of that would be a sea of defaults.”
Luise Barrack of Rosenberg & Estis, said that “The argument that just because this occurred, I don’t have to pay rent, neither one of us see this as a viable argument. You’re going to have to show something a lot more than just ‘I was in the Times Square area and I was expecting a lot of foot traffic, and now I’m not getting foot traffic.’”
For a solution moving forward, Jonathan Mechanic mentioned creating a government-sponsored resolution similar to the Terrorism Risk Insurance Act after the 9/11 attacks which created a federal backstop for terrorism insurance.