On 20 March 2020, the Arizona Governor ordered that all indoor gyms and fitness clubs be closed to the public because of the Covid-19. That closure continued through 17 May 2020 and, after a brief suspension, from 29 June 2020 through 26 August 2020.
In March 2020, a company that had leased some properties in Arizona for commercial purposes (it operates fitness centers) notified its landlord that it would not have fulfilled its payment obligation under the lease during the months it was obliged to remain closed on account of the pandemic. In fact, in the tenant’s view, such payments were excused on account of several theories, including force majeure, frustration of purpose and, finally, impracticability and impossibility.
In view of the tenant's failure to pay the rent, the landlord filed an action for payment, arguing that the invoked defenses did not apply.
By decision of 11 April 2023, the Court of Appeals of Arizona dismissed the tenant’s arguments and ruled in favor of the landlord, stating that the force majeure provision contained in the relevant lease did not excuse tenants’ payment obligations. The Court highlighted that the provision in question expressly stated that “delays or failures to perform resulting from lack of funds or which can be cured by the payment of money shall not be Force Majeure Events”. Since the missed obligations could be cured by the payment of money, the Court held that the tenant was not excused. In examining the tenant’s further arguments, the Court also found that the landlord could not be blamed for the restrictions imposed on the tenants because of the Covid pandemic; indeed, such restrictions had been imposed by the Governor, not by the landlord. As a result, the Court upheld the landlord’s action for payment.
Reference: Vereit Real Est., LP v. Fitness Int', Court of Appeals of Arizona, Division One, 11 April 2023.