Frustration of Purpose and Impossibility Defenses Failed in Recent COVID Related Commercial Eviction
A recent case sheds light on a question many have been wondering about related to commercial leases and eviction related to COVID-19. The facts of this case are probably all too familiar recently. A landlord owned a shopping center and leased a space to a fitness center. Once the COVID-19 related governor’s executive orders were in place, the fitness center closed and stopped collecting dues from its members. The fitness center suspended further payment of rent, so the landlord sent a notice of default and eventually filed suit to evict the fitness center. The tenant defended in part by asserting impossibility and frustration of purpose.
The Minnesota Court of Appeals held that this commercial tenant could not defend against an eviction action for non-payment of rent by asserting defenses of impossibility or frustration of purpose. However, the Court of Appeals left open the possibility that these defenses might be available in a breach of contract claim for the unpaid rent or other causes of action brought outside of an eviction proceeding.
The relevant Minnesota eviction statute is in chapter 504B, and the language of that statute places limits on eviction proceedings, which by design are meant to be limited and short. Additionally, Minn. Stat. § 504B.291 spells out the defenses that can be raised by a defendant-tenant. These include showing that rent has been paid or that rent is not yet due. The Court of Appeals was not willing to recognize additional common law affirmative defenses, such as impossibility or frustration of purpose when used in an eviction proceeding under chapter 504B.
Under Minnesota law, the doctrines of frustration of purpose or impossibility are somewhat similar and require a showing that:
- A party’s performance of the contract is impracticable, or that the principal purpose is frustrated;
- Without that party’s fault; and
- The frustration or impossibility is because of an unforeseeable event, or nonoccurrence of an event, which was a basic assumption of the contract.
These defenses are applied narrowly, and the success of such a defense would depend on the precise wording of the lease, and the facts of the situation. It would seem like COVID-19 and responsive orders from the Minnesota governor were unforeseen, but these alone might not prevent the tenant’s performance of contractual obligations, even if the tenant won’t be able to derive income from the use of the leased space.
Because the facts of this case are unique, and the Court of Appeals left open the possibility that these defenses could be available outside of eviction proceedings, these defenses may still be useful in connection with commercial lease disputes.
Commercial tenants should be aware of all options before suspending rent payments or responding to an eviction notice. Commercial landlords should be strategic about enforcing lease obligations and eviction. If you have questions about a commercial lease, contact one of the attorneys at Pruvent.
¹ SVAP III Riverdale Commons LLC v. Coon Rapids Gyms LLC, Case No. A20-1593 (Minn. App. Sept. 27, 2021).
² Executive Orders 20-04, 20-63, and 20-74 were at issue here.
³ City of Savage v. Formanek, 459 N.W.2d 176 (Minn. App. 1990).