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Landlord Prevented from Seizing Restaurant Liquor License Over Back Rent

August 18, 2020
by Al DeNapoli, Esq. & Taz Islam, Esq.

Falling behind on the rent will not force a Boston area restaurant to give up its liquor license to the landlord – at least not during a public health crisis.

In a Memorandum of Decision and Order issued in the case of NFLSRE 51 Sleeper, LLC, vs. Hopster’s LLC, et al., the Suffolk Superior Court denied the landlord’s request to enjoin the use of its liquor licenses by the restaurant tenant after it had missed rent payments in March and April. The court also limited the landlord to an attachment solely for back owed base rent and not holdover charges because it is not clear that the lease was actually terminated and also because the state’s moratorium on evictions during the COVID-19 emergency prohibited late fees.

After the tenant restaurant failed to pay rent for March and April the landlord took steps to terminate the lease and, under provisions of the lease, transfer the liquor licenses to the landlord. However, the Court determined equitable considerations may prevent the termination of a lease, even when the tenant has failed to pay the rent.

In finding the restaurant tenant, under these circumstances, has a colorable claim the lease was not terminated, the Court cited the restaurant’s “inability to pay rent is not due to mismanagement, malfeasance, or neglect, but rather is the direct result of circumstances beyond its control – its lawful compliance with Governor Baker’s emergency Order limiting all restaurants to takeout and delivery due to the outbreak of COVID 19.”

Moreover, the Court determined the emergency order’s moratorium on evictions prevents the tenant’s eviction, and as such, the tenant’s “legal right to possess and operate [on] the premises remains unchanged.”

The Court also found the landlord failed to demonstrate it could legally accept a transfer of the liquor licenses, as the landlord “put forward no evidence suggesting that the appropriate governmental authorities and officials could – or would - approve of the transfer, especially given the pandemic.”

While all cases turn on specific facts, this case demonstrates for both landlords and tenants some of the ways the court will interpret the impact of the eviction moratorium on attempts to terminate a lease during the pandemic crisis, attempts to enjoin the use of a liquor license (or other elements of a business necessary to keep it in operation), and attempts to seek holdover fees and/or other payments under a lease which may be deemed a penalty.

The restaurant was represented by Al DeNapoli and Taz Islam of Tarlow Breed Hart & Rodgers, P.C.