Law firm responds to suit, claiming overpayment of rent during the pandemic.
Legal experts predicted it and now the effects are becoming all too real. A slew of coronavirus-related litigation is taking shape as individuals and businesses have been directly impacted by the pandemic, forced to close shop, cut workforces, and endure a significant dip to profits. Even business lease agreements have been called into question.
“I’m one of these that believe that when the courts open back up, there’s going to be an explosion of coronavirus-related litigation,” said Cynthia Blevins Doll, an attorney with the firm Fisher Phillips.
Law firm Jenner & Block is one such pandemic plaintiff, filing a lawsuit contending abatement provisions in its Chicago lease cover situations like COVID-19, and it is entitled to an $840,000-plus credit for overpayment of rent. The firm took action in a June 22 answer and counterclaim to a lawsuit filed by its landlord seeking more than $3.7 million in unpaid rent from the tenant.
The landlord, Hart 353 North Clark, an affiliate of global real estate investment management firm Heitman LLC, says Jenner & Block didn’t pay rent for April or May and filed a suit to collect. However, Jenner & Block says it “has a skeleton crew averaging 12 people at the office, leaving at least 89% of its space unoccupied since March 16.” The law firm argues it “paid full rent in March, entitling it to a credit of nearly $700,000 for the space that it wasn’t using.”
In its filing, the firm also says it is “entitled to credits for overpaid operating expenses and property taxes in 2019 and for some reimbursable expenses in 2017, bringing the total credit owed to more than $840,000 after deducting the lower, abated rent that Jenner was required to pay.” And, Jenner & Block refer to the “hard-negotiated rent abatement provisions” in the area which mandate the building’s landlord reduce its rent in the event of “untenantability” that arises “out of any event (force majeure or otherwise).” The provision applies when Jenner “is unable to and does not utilize all, or a portion consisting of at least 20% of the premises.” Such “untenantability” includes when “the premises, or any portion thereof, cannot be accessed or used and occupied as intended by tenant in the normal course of tenant’s business as reasonably determined by tenant and in compliance with applicable laws and is in fact not being used by tenant for the conduct of its business.”
“Our Chicago office lease includes a negotiated provision for rent abatement in the event of a situation, like the global pandemic, that renders the firm unable to use and occupy the space for its intended purpose,” Jenner & Block co-managing partner Randy Mehrberg said. “The firm has invoked that provision.”
Mehrberg added, “We have credited the landlord for the limited space we have been able to use for its intended purpose. Jenner & Block has a very strong financial position; this dispute is exclusively about the enforcement of that provision in the lease.”
Attorney John Riccione of Taft Stettinius & Hollister, representing Heitman, said his client “is committed to a proactive engagement with their partners and tenants to address any challenges constructively that have arisen from the COVID-19 crisis.”