Coronavirus Frustrates the Purpose of a Sit Down Restaurant's Lease, No?

Can a tenant terminate a lease because their purpose was frustrated?

We are getting contacted by restaurateurs who want to get out of their lease because they have to close their sit down / dine in operation and only offer delivery / take out, but can they?

The appellate courts have held that "[i]n order to invoke this defense, 'the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense.'"

On that holding, the doctrine of frustration of purpose seems like it may get a restauranteur out of their lease.

In that holding, an office was able to terminate their lease because the CO didn't permit office use. Through analogizing to where an office tenant utilized frustration of purpose to get out of a lease because of an "inability to lawfully use the premises" based upon the CO, it's possible that a restaurateur can utilize the doctrine of frustration of purpose to terminate the lease where the purpose of the lease was to offer sit-down dining and now the same is not allowed as a matter of law.

However, appellate courts have also held that "a frustration of purpose defense 'is not available when the event preventing performance was foreseeable.'"

Expect a lot of restaurants to make this argument going forward and the issue of foreseeability will be everything if it gets to a trial. 

Attention Insurance Companies - DFS Puts More on Your Plate

The Department of Financial Services' Circular No. 5 (2020) is making its rounds and requires all entities regulated by DFS to submit a COVID-19 Preparedness Plan. All regulated entities are required to submit the plan on or before Thursday, April 9, 2020.

DFS is requiring the Preparedness Plan to account for both operational and financial risks. On the operational side, the plan should include:

1. Preventative measures tailored to the entity’s specific profile and operations to mitigate the risk of operational disruption, which should include identifying the impact on consumers and vendors;
2. A documented strategy addressing the impact of the outbreak in stages, so that the entity’s efforts can be appropriately scaled, consistent with the effects of a particular stage of the outbreak;
3. Assessment of all facilities, systems, policies and procedures necessary to continue critical operations and services if members of the staff are unavailable for longer periods or are working off-site, including the effectiveness and security of remote access;
4. Employee protection strategies, critical to sustaining an adequate workforce during the outbreak, including employee awareness and steps that employees can take to reduce the likelihood of contracting COVID-19;[1]
5. Assessment of the preparedness of critical third-party service providers and suppliers;
6. Development of a communication plan to effectively communicate with consumers and vendors, and to deliver important news and instructions to employees, along with establishing forums for questions to be asked and addressed;
7. Testing of the plan to ensure that the policies, processes, and procedures are effective; and
8. Governance and oversight of the plan, including identifying the critical members of a response team, to ensure ongoing review and updates to the plan, including the tracking of relevant information from government sources and the entity’s own monitoring program.

On the financial risk side, the plan should include: 

1. Assessment of the overall impact of COVID-19 on reserve requirements, consumers’ ability to make timely premium payments, and resources required to timely process claims;
2. Assessment of the credit risk of counterparties and business sectors impacted by COVID-19;
3. Assessment of the credit exposure to counterparties and business sectors impacted by COVID-19 arising from investing and other financial transactions;
4. Assessment of the scope and the size of admitted assets or other investments adversely impacted by COVID-19 that currently are in, or potentially may move to, non-performing/delinquent status, including consideration of stress testing and/or sensitivity analysis of such assets or investments;
5. Assessment of the valuation of assets and investments that may be, or have been, impacted by COVID-19; and
6. Assessment of the overall impact of COVID-19 on earnings, profits, capital, and liquidity.

A full copy of Circular No. 5 (2020) can be found HERE. 

If it seems that DFS is just here to put more on your plate when you need it least, DFS has also issued a temporary COVID-19 relief order which improves the ability of banks and insurers to operate remotely. A full copy of the temporary relief order can be found HERE. 

Nassau and Suffolk County Evictions and Foreclosure Auctions on Hold

Effective 5:00 pm on March 16, 2020, no eviction orders shall be signed and no foreclosure auctions shall be held in all Nassau and Suffolk Courts. The hold is in effect until rescinded and it is in accordance with the protocol put into place by the Chief Administrative Judge of New York State Courts due to COVID-19.

You can see the Nassau County Administrative Order here and the Suffolk County Administrative Order here.

Courts Are Closed | Lieb at Law is Working For You

The Coronavirus is Affecting Us All
The spread of the novel coronavirus, COVID-19, has resulted in the disruption of everyone's daily lives, including the legal world. However, Lieb at Law is still operating at 100% capacity and working for you.
 
Lieb at Law is Fully Operational
Lieb at Law is a fully digital law firm. Thanks to our existing cloud systems, our staff is operating at full capacity from outside of the office. All attorneys, paralegals and support staff have full access to our telephone, case management, and file management systems. Because of our ability to work remotely, our office is currently not physically staffed. Please do not come to our office without an appointment. If you have any questions about your case, transaction, or any other legal matter, please contact us through phone or email and we will attempt to immediately assist you.

Lieb is Leading The Way on Remote Closings 
Real Estate Transactions (Closings) are moving forward and Lieb at Law is leading the move to fully remote closings, including requests to our government to change laws, rules, and regulations to facilitate remote notarizations (the only time that you currently need to see another human in a real estate deal). Our attorneys and paralegals are using every tool available to ensure closings occur on time, without cancelation. Our attorneys and paralegals will contact you to advise you exactly how your closing will proceed, and when.

Lieb is Still Litigating
The Court system is shutting down all non-emergency functions. New rules and procedures are being implemented every day and Lieb at Law is up to date with every change. Depositions, trials, mediations, arbitrations, court conferences, and other in-person proceedings are being adjourned administratively by the courts beyond April 30, 2020. If you had a legal proceeding scheduled to occur before April 30, 2020, it likely has already been adjourned. We are contacting our clients to inform them of these adjournments, but if you are unsure if you should appear at any scheduled proceeding, please contact us ahead of time to confirm its status. 

While the Courts are closed, we are still litigating. Discovery demands, and responses, motions, negotiations, and other proceedings that do not require in-person interactions are continuing. We will work diligently to ensure that your case is minimally affected by the Court closures. In fact, this is a great opportunity for settlement and we are working diligently to resolve cases outside of the court system.

Lieb Knows Employment Law
Lieb at Law attorneys are tracking the development of employment laws that are accompanying mass quarantines and the shuttering of businesses. Whether you are an employer or an employee, it is important that you know and understand your rights and obligations. We can answer all your employment questions, and we encourage you to follow our blog (blog.liebatlaw.com), call or email for all of the latest news and developments. 

Lieb is in Bankruptcy Law
We relaunched our bankruptcy practice (previously operated during the Great Recession) to combat the needs of our clients, particularly businesses that are facing revenue shortfalls and must restructure their debts to survive the quarantines. Contact us for a consultation should you or your business have questions about a Chapter 7, 11 or 13.

Lieb Leads the Way
We've been ready the entire time for this. We are agile and leverage technology like no other law firm around. Lieb at Law has always been at the forefront of the evolving legal landscape. During the Great Recession and the foreclosure crisis, we rose to the top and differentiated ourselves as a leader by knowing more about the new laws and regulations than anyone else. In fact, we trained the legal and real estate brokerage industries through our continuing education classes. Our talented attorneys and paralegals are dedicated to remaining the first to know and understand changes in laws that accompany tumultuous times. In 2020, Lieb at Law is even more capable. Whatever changes the novel coronavirus brings, you can trust that Lieb at Law will be leading the way with legal solutions. 

Please be safe and take all necessary precautions to protect yourself and your loved ones. 

Governor Cuomo Announces Legislation Providing Paid Leave and Job Protection to Employees

On Tuesday March 17, 2020, Governor Cuomo announced that the New York State legislature has agreed to paid sick leave and other protections for employees as a result of the impact of the Coronavirus. While the text of the bill has not yet been released and has not passed the legislature, the Governor announced that the legislation, which will become effective immediately upon enactment, will include the following:

• Employers with 10 or fewer employees and a net income less than $1 million will provide job protection for the duration of the quarantine order and guarantee their workers access to Paid Family Leave and disability benefits (short-term disability) for the period of quarantine including wage replacement for their salaries up to $150,000.
• Employers with 11-99 employees and employers with 10 or fewer employees and a net income greater than $1 million will provide at least 5 days of paid sick leave, job protection for the duration of the quarantine order, and guarantee their workers access to Paid Family Leave and disability benefits (short-term disability) for the period of quarantine including wage replacement for their salaries up to $150,000.
• Employers with 100 or more employees, as well as all public employers (regardless of number of employees), will provide at least 14 days of paid sick leave and guarantee job protection for the duration of the quarantine order. 

The legislation will also include annual sick leave (similar to the NYC law), which will be effective 180 days after enactment. The legislation, according to the Governor, will include the following:

• Employers with 4 or fewer employees and a net income less than $1 million will provide at least 5 days of unpaid sick leave each year.
• Employers with 5-99 employees and employers with 4 or fewer employees and a net income greater than $1 million will provide at least 5 days of paid sick leave each year.
• Employers with 100 or more employees will provide at least 7 days of paid sick leave each year.