Judicial Notice of COVID-19 Pandemic Held not to be a Substitute for Evidence of Mitigation of Damages
The COVID-19 pandemic has had a significant impact on the economy and has caused many businesses to struggle financially. Landlords and tenants have been navigating the challenges posed by the pandemic, including issues related to rent payments and lease obligations. In the recent unpublished case of Washington-Hudson Associates II LLC v. Town Sports International Holdings, Inc. (A-1357-21), the New Jersey Appellate Division addressed a dispute between a landlord and the guarantor of a tenant over unpaid rent and other charges under a commercial lease.
The first finding was that the lease in question did not provide for any rent abatement or reduction in the event of a pandemic or other unforeseen events. The court noted that the lease, "was clear an unambiguous in providing there would be 'no abatement, diminution or reduction' in rent for 'any inconvenience, interruption, cessation or loss of business,' caused 'directly or indirectly' by government orders. The court emphasized that the parties' contractual obligations should be enforced according to their plain terms, and required the guarantor to cover unpaid rent even though the tenant's business could not operate due to governmental orders.
Once the court found that the rent was not abated by the pandemic, the key issue in the case became whether or not the pandemic should be taken into account when determining whether or not the landlord mitigated its damages. The trial court had taken judicial notice of the pandemic and granted summary judgment, finding that "no reasonable jury could find that [the landlord] had failed to mitigate its damages because it could not have been expected to find a new tenant "in the middle of COVID when there's no vaccines."
The Appellate Division disagreed and opined that the trial court should not have taken judicial notice of the pandemic with regard to the mitigation of damages. The court found that the impact of the pandemic on the economy and on businesses was not a fact that was generally known or capable of accurate and ready determination. The court noted that the impact of the pandemic could vary depending on a variety of factors, including the type of business and the location of the business. As such, the court held that the trial court erred in taking judicial notice of the pandemic with regard to the mitigation of damages as opposed to letting the case proceed through discovery and trial to establish a record of the landlord's efforts to mitigate its damages.
In summary, this case highlights the importance of carefully reviewing lease agreements and understanding the parties' contractual obligations. It also underscores the need to seek legal advice when facing disputes over commercial leases, particularly in the context of the ongoing pandemic, as the impact of the pandemic will not be taken into account automatically in disputes over rent and other charges. Washington-Hudson Associates II LLC v. Town Sports International Holdings, Inc. (A-1357-21)
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Peter J. Vazquez, Jr.