Operations
How Caffe Nero won landlord-tenant lawsuit
Although Caffe Nero said it failed to pay rent for six months at one of its Boston locations, a judge dismissed the landlord's motion requesting payment.
February 15, 2021 by Cherryh Cansler — Editor, FastCasual.com
After being forced to close a Boston location in April 2020 following COVID-19 restrictions, London-based Caffe Nero found itself in the middle of a dispute with its landlord for failure to pay rent.
The Italian-style coffeehouse, which didn't pay rent from April to October, eventually vacated the Newberry Street location in late October, according to a motion filed by its landlord,UMNV, requesting unpaid rent plus interest and administrative expenses. Although the motion didn't request a specific dollar amount, it demanded liquidated damages for the rest of the 15-year lease term, as well as attorneys' fees and expenses, according to the motion filed with theSuffolk Superior Court in Boston.
The court, however, denied the motion, saying that the cafe's obligation to pay rent was discharged under the doctrine of "Frustration of Purpose" after Massachusetts Gov. Baker barred restaurants in March from allowing on-premises consumption of food or beverages, indoors or outside.
CaffeNero, which spent $1.3 million to build out the space, opened the location in June 2018.
AndreaMartin, who represented Caffe Nero, said that although many landlords have been flexible and forgiving during this extremely challenging time for restaurants,UMNVwas unwilling to negotiate.
"(They) sued our client, who like many other restaurants simply could not pay the rent due the circumstances," Martin told FastCasual. "We are thrilled that the court applied our arguments to the law to give the tenant a break and this is now a precedent for other restaurants facing similar situations."
Although the location was closed for about two months, it re-opened in June after Baker lifted restrictions to allow outdoor table service.Caffe Nerodid not pay rentbut operated through September 2020, offering only outside table service and takeout.
The chain said in March that it had requested in writing that the landlord waive or reduce rent, but UMNVdeclined the request and said it would be in default unless it paid the April rent within five days.
Caffe Nero failed to make the payments for April or May, according tot he motion, so UMNV sent another letter saying it was terminating the lease, alleging that Caffe Nero had defaulted and needed to "quit and surrender the Premises."
Once it reopened the Newbury Street operation, Caffe Nero told the court that it offered to pay UMNVa higher percentage of sales in lieu of fixed rent, but UMNV rejected the offer, according to court documents. The cafe continued to operate through October but returned the keys and vacated the premises on Oct. 29, according to the motion.
How "Frustration of Purpose" works for Caffe Nero
Under the legal doctrine known as "frustration of purpose," a tenant is excused from performing its contractual obligations "when an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the object or purpose of the contract, thus destroying the value of performance." Martin said UMNVstarted the eviction proceedings against the cafe in the absence of good-faith during the ongoing COVID-19 global pandemic.
"Our argument for Caffe Nero was there was no clearer frustration of purpose of its lease than where the exact permissible use of the space was barred by government restriction," he told FastCasual. "Longstanding contract law provides that a tenant is discharged under the doctrine of frustration of purpose from its obligations to its landlord under the lease when such performance is rendered impossible.
"Under circumstances where the landlord was unwilling to negotiate with Caffe Nero, we were pleased to see the court relieved Caffe Nero of its obligations and found the termination invalid," Martin said.
Founded in 1997, Caffe Nero has more than 1,000 global locations, of which 32 are in Boston.
The chain directed FastCasual's request for comment to Martin.
As of press time, FastCasual was unable to contact UMNV.
About Cherryh Cansler
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