“Act of God” legal strategy to skip rent worked for this eatery

Bankruptcy judge rules government order was “force majeure”

Chicago /
Jun.June 19, 2020 11:30 AM
Giglio’s State Street Tavern and restaurateur Bobby Hitz (Google Maps, Giglio's)

Giglio’s State Street Tavern and restaurateur Bobby Hitz (Google Maps, Giglio’s)

A Chicago restaurant got a big break on its rent by using a legal strategy other retailers may hope to copy.

A federal bankruptcy judge reduced Giglio’s State Street Tavern’s rent to just 25 percent from April to June, the Wall Street Journal reported. Giglio’s will still have to pay its March rent in full.

Judge Donald Cassling agreed that the government’s March 16 ban on dining, which sent the restaurant’s revenue plummeting, amounted to “force majeure.” The so-called “act of God” clause protects businesses from forces outside of their control.

The restaurant’s landlord, Kass Management Services, had hoped to force Giglio’s to pay its rent for February through June or leave the premises. Instead, Cassling granted the rent reduction in proportion to the loss of revenue.

Legal practitioners around the country may seek to employ such a legal strategy to secure additional protection for commercial tenants at risk of financial ruin.

Meanwhile, lawmakers in New York have passed a legislative remedy. The City Council approved a measure to shield restaurant owners from personal liability for violating their leases. Critics questioned whether the bill is constitutional.

The financial impact of the coronavirus has not been uniformly distributed across real estate sectors. Some restaurants easily switched to take-out or delivery, while others simply closed. Many big-box retailers have continued to pay rent, while clothing stores have struggled. One survey found half as many deadbeat chains in June as it found at the same point in May. [WSJ] — Georgia Kromrei


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