COVID-19 Shutdown Orders Are Not a “Taking” Under the Lease

 What Happened: A clothing retailer leased space for “[a]ny general retail use, including the display and sale of apparel, shoes and accessories, gifts, cards, furniture, home furnishings, housewares, packaged foods prepared for off-site consumption, plants, fresh and dried flowers, pots, containers and stands for plants or flowers, and/or items related to the foregoing, together with ancillary office and storage use.” The lease also excused the tenant’s duty to pay rent if it was deprived of such use as a result of a “taking.” The tenant claimed that the governor’s COVID-19 shutdown orders were a taking under the lease.

Result: The New York federal court rejected the tenant’s taking defense and granted the landlord summary judgment.

Reasoning: The COVID-19 orders didn’t deprive the tenant of its right to use the property. True, the tenant couldn’t use the space for “the display and sale of apparel, shoes and accessories” while the orders were in effect. But the tenant’s interpretation of “general retail use,” which the lease didn’t specifically define, as covering only in-person display and sale of apparel was unreasonable and ignored all of the other uses listed after “including” that weren’t barred by the shutdown orders. The tenant “continued to use, occupy, and enjoy the Leased Space for several general retail uses, including: (i) display and storage of merchandise; (ii) fulfillment of online orders through PPS [pick/pack/ship] and curbside; and (iii) advertising through signage on the outside of Store.”

• Delshah 60 Ninth, LLC v. Free People of Pa., LLC, 2022 U.S. Dist. LEXIS 116284