Business, like life, can be full of unexpected twists and turns. At every twist, turn, and hurdle along your path, it is important to understand what your options are, which is why you need a knowledgeable Florida business lawyer working for you. For example, take the 11th Circuit Court of Appeals case of a Southwest Florida commercial tenant whose tanning salon business encountered a hurdle when it received an unexpected and unfavorable zoning ruling. The salon tried to use the ruling as a basis for getting out of its lease, but the courts rejected that argument because the ruling did not create a valid “frustration of purpose.”
The would-be tenant was a UV and spray-on tanning salon. The salon and the landlord executed a lease in March 2013. The tenant, desiring to make certain improvements to the space, filed a permit with the City of Marco Island. The city rejected the permit, claiming that the use for which the property was zoned didn’t allow tanning salons.
The tenant promptly notified the landlord of the denial. The landlord first retained counsel on its end and then subsequently provided the tenant with a referral to a local attorney, whom the landlord claimed would give the tenant “the best shot at getting your use restriction lifted.”
Even though both the landlord and the tenant agreed that the denial was erroneous and the space was zoned for tanning salons, the tenant decided it didn’t want to fight the matter in the legal process. It expressed to the landlord its desire not to spend money on attorneys and its frustration over missing most of its high season for tanning customers due to the delay. Thus, instead of challenging the zoning decision, the tenant simply walked away, never taking possession of the space nor paying any rent to the landlord.
After several months of non-payment, the landlord sued the tenant in federal court for breach of contract. The tenant offered several defenses, but its primary one was that the zoning decision amounted to “frustration of purpose” and barred the enforcement of the lease contract.
Frustration of purpose is a legal doctrine that absolves a contract party from its obligation to perform under the agreement if some outside actor (like a zoning board) acts in a way that functionally prevents the party from performing under the contract. This rule has come up in many cases involving zoning authorities. These have included a variety of tenants, ranging from check cashing/cash advance businesses to child care facilities to gambling/gaming businesses to tanning salons.
One of the keys to this defense is that the denial creating the frustration must have been unforeseeable. Another key is that the outside actor must have created an absolute impediment, rather than just an inconvenience, in order to claim frustration.
That last factor proved to be a problem for this tenant. All of the tenant’s actions before abandoning the lease came back to work against it. In order to constitute frustration of purpose, the barrier must be beyond the tenant’s control. In this case, the tenant agreed with the landlord, and both argued in court, that the zoning decision was clearly wrong and that the tenant’s desired use was permitted under the zoning rules. The tenant, in other words, did retain control because it could have eliminated its “frustration,” the 11th Circuit reasoned, simply by appealing the decision. The mere facts that it was disappointed with losing prime tanning months due to the delay and was unhappy with spending money on legal counsel did not amount to true frustration of purpose, according to the federal courts. The law broadly opposes invalidating contracts, including commercial leases, simply because performance is “profitless and expensive,” as opposed to impossible, the 11th Circuit stated in its opinion.
Wherever you are in the commercial leasing process, it helps to have skilled Florida counsel working for you. The knowledgeable South Florida commercial landlord-tenant attorneys at Stok Folk + Kon have been helping both commercial landlords and tenants defend their rights and their interests for many years.
Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you protect your interests.
More blog posts:
Florida Landlord Entitled to Summary Judgment on Possession But Not Rent in Lease Abandonment Case, Florida Business Lawyers Blog, March 3, 2017
What Happens When a Change to Florida Law Alters Your Commercial Lease?, Florida Business Lawyers Blog, Nov. 15, 2016