Many leases for commercial property contain an express covenant of “quiet enjoyment,” which typically provides that the property owner may not interfere with the tenant’s use and occupancy of the property so long as the tenant has complied with its obligations under the lease. Given the current crisis, if a commercial tenant is unable to use or occupy leased premises due to the COVID-19 pandemic, or government orders relating to the pandemic, has that covenant been breached? For leases governed by New York law, the answer under current law is likely no.
Under New York law, in order to demonstrate a breach of the covenant of quiet enjoyment, a tenant must demonstrate an actual or constructive eviction from the premises. Actual or constructive eviction, in turn, requires a wrongful act by the landlord substantially and materially depriving the tenant of beneficial use and enjoyment of the property, and the tenant’s abandonment of the property as a result. As the New York Court of Appeals has put it, “the acts of the landlord must preclude the tenant from the beneficial enjoyment of the premises.” Accordingly, at least one New York court has held that an “act of nature,” such as a hurricane, cannot support a claim of actual or constructive eviction.
Based upon the foregoing principles, in the case of the COVID-19 pandemic, where a tenant is unable to utilize leased premises due either to the pandemic or government orders relating to the pandemic, New York courts are, at least based upon present law, unlikely to find a breach of the covenant of quiet enjoyment. In those cases, the tenant is not prevented from using the property due to a wrongful act of the landlord, but rather because of circumstances or governmental directives outside of the landlord’s control. However, to the extent a landlord acts gratuitously to exclude a tenant from property where it was not otherwise required to do so, using COVID-19 or government orders as a mere excuse, tenants may be able argue a breach of the covenant.