Landlords Are Suing Retailers for Unpaid Rent

June 12, 2020

Landlords are taking retail tenants to court for missed rental payments. Some property owners who didn’t receive payments in April and May are filing lawsuits to try to collect on them now that they’re past their 30-day grace period, The Wall Street Journal reports.

Tenants are arguing “force majeure”—an effect outside of their control, in this case the global pandemic—is preventing them from making their payments. They contend that their leases should be modified due to the shutdowns in many states that forced some businesses to close.

However, landlords are countering that the pandemic does not qualify them to miss payments, regardless if they’re experiencing fewer customer sales.

Big-name retailers like Gap Inc. and PetSmart Inc. as well as the retail arm of the National Basketball Association are among those being taken to court and accused of breach of contract for withholding rent. Simon Property Group, the nation’s largest mall owner, sued Gap last week over unpaid rent for April, May, and June, adding up to about $66 million in owed payments.

“It’s important to note the profound effect that COVID has had on shopping centers as well, leaving them closed to us and our customers for months,” Mark Daniel Snyder, communications manager at Gap, told The Wall Street Journal. He said he hoped Gap and the landlords could reach a mutual, fair agreement over the rent dispute.

"People are at loggerheads on how to resolve this," Gene Spiegelman, vice chairman at Ripco Real Estate, a property brokerage, told The Wall Street Journal. “Landlords and tenants are going to take it out on each other.”

Tenants are also starting to file lawsuits. For example, The Wall Street Journal reports that some tenants are suing insurance companies that are denying their business interruption claims or they’re filing summons to their landlords to invalidate leases and let them out of their rental obligations.

Landlords’ New Credo for Late-Paying Retail Tenants: I’ll See You in Court,” The Wall Street Journal (June 9, 2020) [Log-in required.]