Judge rules Newbury Street landlord owed nothing by tenant that couldn't pay rent after pandemic hit

When Gov. Baker ordered restaurants shut last March, Caffe Nero missed the April rent payment for its Newbury Street outlet and asked landlord UrbanMeritage for some help because it could no longer operate a sit-down cafe.

UrbanMeritage refused and instead ordered the chain to pay up or vacate the premises tout suite. The landlord went to district court in May to evict Caffe Nero. And then it sued in superior court for all the rent it otherwise would have gotten until the coffeehouse could re-open in June - and for damages based on the value of the 12 or so years Caffe Nero had left on its lease, plus various expenses and lawyers' fees.

But in a ruling issued last month - and commented on this week by the Boston Business Journal - a Suffolk Superior Court judge told UrbanMeritage: You lose, you get nothing, good day sir!

Judge Kenneth Salinger said it was all there, black and white, clear as crystal, right in the contract UrbanMeritage had signed with Caffe Nero in 2017: To start, the contract specifically said Caffe Nero could only use the space, on which it spent $1.3 million and more than a year to outfit, to provide a sit-down coffeehouse that served "great coffee and food that customers could enjoy and linger over in a comfortable indoor space" - and that became impossible when Gov. Baker ordered indoor dining spaces shut effective March 24.

The contract, in fact, specified that Caffe Nero could use the indoor space "for no other purpose," which then lead to Salinger's second point: That Caffe Nero was protected by a legal doctrine known as "frustration of purpose," that it couldn't make its rent because of something completely out of its control: The rapid spread of a global pandemic and the governor's efforts to slow that by ordering indoor restaurant space shut. There's no doubt that Caffe Nero was frustrated in its purpose of making money through an indoor cafe when the governor has ordered such spaces shut, he wrote.

Had the lease allowed the chain for using the indoor space for something other than a sit-down cafe, that might be a horse of a different color, but the lease did not and so UrbanMeritage was wrong to try to evict the chain when it could no longer legally operate a site-down cafe.

Under the doctrine of frustration of purpose, Caffe Nero's obligation to pay rent was discharged when it was barred from letting customers drink or eat inside the leased premises, at least from March 24 to June 22, 2020. Therefore, Caffe Nero did not breach the Lease by not paying rent for this period, UMNV's notice of default was in error and not effects, and UMNV acted improperly in May when it terminated the lease for non-payment of rent in April.

Although Salinger sided with Caffe Nero, his ruling is still bittersweet for the chain: It disassembled its walk-in freezer and refrigerator, removed all the tables, chairs and other fixtures and permanently shut the location on Oct. 29.