Schulte Roth Not Entitled to Rent Abatement During Pandemic

Posted: July 23, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Category Contracts

Schulte Roth Not Entitled to Rent Abatement During Pandemic

On July 9, 2025, following a bench trial, Justice Andrea Masley of the New York County Commercial Division dismissed a lawsuit brought by Schulte Roth & Zabel LLP against its landlord, rejecting Schulte Roth's claim that a rent-abatement provision in its lease entitled it to an abatement as a result of the COVID-19 pandemic.

Earlier in the case, captioned Schulte Roth & Zabel LLP v. Metropolitan 919 3rd Avenue LLC, Index No. 655632/2020, Justice Masley denied landlord's motion to dismiss, holding that the rent-abatement provision was ambiguous, and so there was a triable issue of fact concerning whether Schulte Roth was entitled to a rent abatement even if there was no breach of the lease by landlord. The First Department affirmed this ruling, agreeing with Justice Masley that the rent-abatement provision was ambiguous. Schulte Roth & Zabel LLP v Metro. 919 3rd Ave. LLC, 202 A.D.3d 641 (1st Dep't 2022).

The clause at issue stated that Schulte Roth would be entitled to a rent abatement if "Tenant is unable to use the Premises, . . . due to Landlord's breach of an obligation under this Lease to provide services, perform repairs, or comply with Legal Requirements . . . other than as a result of Unavoidable Delays or Tenant Delays (or, if Tenant's inability to use the Premises . . . results, in whole or in part, from Unavoidable Delays and such condition continues for a period in excess of fifteen (15) consecutive Business Days).”

According to the First Department in its 2022 decision, this provision was reasonable susceptible of two competing interpretations:

On the one hand, section 5.4 can be reasonably interpreted to mean that plaintiff will be entitled to a rent abatement only if plaintiff's inability to use the premises is a result of defendant's breach of its obligations under the lease. Pursuant to this interpretation, the condition within the parentheses is directly connected to the condition that comes before the parenthesis and means that the plaintiff would be entitled to a rent abatement if the plaintiff is unable to use the leased premises because the landlord breached an obligation under the lease, and the breach is caused, in whole or in part, by an Unavoidable Delay, as defined in the lease, if the Unavoidable Delay continues for more than 15 business days.

On the other hand, section 5.4 can also be reasonably interpreted to mean that plaintiff will be entitled to a rent abatement if one of two conditions occur. Specifically, the plaintiff would be entitled to a rent abatement if it is unable to use the leased premises, which is caused by either (i) landlord's breach of an obligation under the lease, or (ii) Unavoidable Delays that continue for more than 15 business days. Pursuant to this interpretation, the use of the disjunctive "or" at the beginning of the parenthetical clause distinguishes the second condition within the parenthetical as a separate and alternative condition to the first condition, which comes before the parenthesis. Moreover, as a separate condition, it does not require that the landlord breach an obligation under the lease in order for the plaintiff to be entitled to a rent abatement.

In her post-trial decision--the purpose of which was to resolve this ambiguity--Justice Masley considered extrinsic evidence, including related to a separate lease on which the Schulte Roth lease was based. But Justice Masley ruled for landlord, holding that Schulte Roth "failed to satisfy its burden at trial to establish that the parties intended to read § 5.4 as SRZ contends."

It is not often that disputes over interpretation of a commercial lease go to trial. But as this case shows, if the lease is ambiguous--meaning it is reasonably susceptible of more than one interpretation--then the court will look to extrinsic evidence to determine the parties' intent and resolve the ambiguity. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning whether a lease provision is ambiguous.