In late July, Sterling Landlord Corp posted a notice on the front door of Ellen’s Stardust Diner, a Times Square tourist destination known for its singing waiters.
The message was bleak: Ellen’s owed $618,000 in rent and if it did not pay by Aug. 7, the location at 1650 Broadway would be shut down.
But Ellen’s had no plans to pay. Instead, it sued its landlord in New York’s Supreme Court Thursday, disputing the debt and claiming Sterling Landlord Corp owes it $72,000 for the portion of March that the eatery was closed.
According to the lawsuit, the diner has leased the premises since 1992 and signed a new, 10-year lease with Sterling in 2017.
In that lease, both parties agreed that rent payments would cease if the property was damaged in such a way that it was impossible to operate a business there, the lawsuit said.
The pandemic forced many restaurants to close, the suit said; Ellen’s shut its doors March 16, when the statewide ban on indoor dining took effect. Only takeout and delivery were allowed, but many restaurants did not stay open for those services.
“Since the purpose of the lease has been temporarily frustrated due to events beyond the control of the parties, [Ellen’s] does not owe rent,” the suit said.
It questioned the validity of Sterling’s July 16 default notice and asked for a judge to rule that the lease had not been breached and that the landlord had no grounds to terminate it.
What’s more, it said: “Given the casualty event of March 16, 2020, [Ellen’s] is entitled to a rent credit in the amount of $72,580.65 for the overpayment of rent in the month of March 2020.”
Some attorneys consider the “frustration of purpose” argument that many commercial tenants are citing to be a legal long shot.
Terry Havel, vice president of Sterling Landlord and a signatory on the deed of 1650 Broadway, did not respond to requests for comment.
Write to Sylvia Varnham O’Regan at so@therealdeal.com