In a recent article published by the New York Law Journal, “COVID Rent Is Not Settled: Why Delshah v. Free People Reopens the Ledger,” Litigation attorneys Joshua S. Bauchner and Luke A. Kushner examine the Second Circuit’s decision in Delshah 60 Ninth, LLC v. Free People of PA LLC and its potentially significant implications for commercial landlords, tenants, and practitioners navigating the lingering effects of the COVID-19 pandemic.
The decision challenges a widely accepted assumption that pandemic-era rent disputes have largely been resolved. According to the authors, the Second Circuit identified a critical error that appeared throughout COVID-related commercial lease litigation: courts often treated a tenant’s limited ability to use leased premises—such as storing inventory or fulfilling online orders—as equivalent to the ability to operate its business. The court rejected that interpretation, emphasizing that the ability to use a space and the ability to operate a business are distinct concepts that must be analyzed separately under the terms of the lease.
Applying traditional principles of contract interpretation, the Second Circuit found that government shutdown orders prevented Free People from operating its brick-and-mortar retail business during a specific period in 2020, thereby excusing its rent obligations under the lease’s “takings” provision. The ruling also revived claims seeking reimbursement of rent payments that may have been made despite no rent being owed.
Bauchner and Kushner explain that the decision could have broader implications for commercial lease disputes, including the potential recovery of pandemic-era rent payments, renewed scrutiny of settlement agreements, and reconsideration of claims previously dismissed on procedural grounds. The authors encourage landlords, tenants, and their counsel to carefully review lease language, shutdown timelines, payment histories, and settlement provisions to determine whether additional claims or defenses may still exist.
As the authors note, Delshah does not create new law, but it does provide a significant appellate-level interpretation that may reshape how courts and practitioners evaluate COVID-related rent obligations moving forward.
Read the full article here COVID Rent Is Not Settled: Why Delshah v. Free People Reopens the Ledger.