What Happened: The federal government leased two floors of an office in Queens to house the Field Office of the United States Citizenship and Immigration Services. The 15-year lease included the following clause: 

In case of partial destruction or damage, so as to render the premises untenantable, as determined by the Government, the Government may terminate the lease by giving written notice to the Lessor within 15 calendar days of the fire or other casualty. (emphasis added)

Six years later, a Field Office employee discovered extensive water damage throughout the premises caused by a sprinkler head that had burst the night before. The government determined that the premises were no longer tenantable and that the landlord’s remediation plan was inadequate. So, it terminated the lease. The landlord sued the government for breach of contract and violation of the implied covenant of good faith and fair dealing.

Ruling: The federal court tossed the landlord’s case without a trial. 

Reasoning: The government’s determination that the property was untenantable due to water damage was not unreasonable, according to the court, especially since the lease didn’t define or provide criteria for evaluating “untenantable” The landlord had argued that the government had to base its determination of whether the offices were tenantable on the common law meaning of “untenantable” in landlord-tenant law and would have reached a different conclusion had it done so. 

But the court brushed the argument aside because it effectively read the words “as determined by the Government” out of the lease. “The disputed clause should be interpreted according to its plain meaning, i.e., that the government was given the authority to determine whether the property was untenantable.” And when the government is given the power to render final decisions on questions of fact, the court concluded, its decision will be set aside only if the decision is arbitrary, capricious, or unreasonable.

• 27-35 Jackson Ave. LLC v. United States, 127 F.4th 1314, 2025 U.S. App. LEXIS 2439, 2025 WL 379728