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An eight-month legal battle has come to an end with a Manhattan judge ruling that Victoria’s Secret is still on the hook for its nearly $1M per month rent in Herald Square, despite the problems caused by the coronavirus crisis.
The retailer sued its landlord, SL Green, in May, saying it should be allowed out of the lease for space at 2 Herald Square. Lawyers had argued that with the city closed for business, the lease was rendered “nonsensical.” The retailer has been in the space for nearly two decades.
However, Justice Andrew Borrok dismissed the lawsuit last week, Crain’s New York Business reports, potentially signalling to other retailers that the government-enforced store closures will not provide a way to skirt leases and rent.
“The court's ruling dismissing Victoria's Secret’s lawsuit makes clear that the pandemic cannot be exploited by large national retailers to avoid their contractual rent obligations,” SL Green lawyer Stephen Meister told Crain’s. “We will continue to work with Victoria's Secret to collect what is owed and bring this matter to an amicable close.”
The firm sued the lingerie store in June, requesting $25M in past and future rent, along with interest and legal costs.
Victoria’s Secret was just one of many retailers suing their landlords, arguing that the impacts of the pandemic — like reduced traffic and laws that required stores to close their doors — meant the terms of their leases were no longer applicable.
Subsidiaries of the Gap Inc. — Gap, Athleta, Banana Republic, Old Navy and Janie & Jack — filed a lawsuit in Illinois against Brookfield, saying its mall leases should be adapted or terminated. Valentino has sued its Fifth Avenue landlord, claiming in its complaint that it wants out of its lease there because the location is no longer prestigious.
However, multiple lawyers told Bisnow last year that the complaints, most of which hinge on a contract law rule called “impossibility of business” or “frustration of purpose,” were unlikely to succeed.
“It’s a Hail Mary,” Luise Barrack, who leads Rosenberg & Estis’ litigation department, said in an interview in August. “Rather than waiting to be sued, these tenants are thinking, ‘Let’s say we don’t have an obligation.’”
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