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HomeNewsletterJudge orders Gap to pay NYC landlord $24M in back rent

Judge orders Gap to pay NYC landlord $24M in back rent

A New York State Supreme Court judge recently ruled that clothing retailer Gap must repay more than $24 million in back rent to 44-45 Broadway Leasing Co. for its 1530 Broadway location, Commercial Observer reports. The dispute goes back to June 2020 when the retailer began the legal battle.

“(The court’s decision), has made it clear that avoiding your rental obligations is not going to work and that those who try will face consequences,” Warren Estis of Rosenberg & Estis, the law firm that represented 44-45 Broadway alongside Norman Flitt and Alex Estis, told San Francisco Business Times.

Gap and Old Navy have had stores at 1530 Broadway since 2015. The stores closed when the COVID-19 pandemic began and have yet to reopen. The closure has led to 60,000 feet of unoccupied retail space. Gap sued its landlords last year to get out of making the back payments, citing the pandemic for disrupting its in-store operations. Gap argued to terminate its lease and forgo the rent.

Rosenberg & Estis noted that Gap continued to use the Times Square property’s billboard and had customers on the landlord’s premises to show that the pandemic didn’t completely shut down the retailer’s operations, The Real Deal reports.

Judge Debra James ruled in favor of 44-45 Broadway and dismissed Gap’s case. James’ verdict ordered Gap and Old Navy to repay its approximately $3 million a month rent. Gap is also expected to front a $5.8 million bond to cover its May and June rent, according to Commercial Observer.

“It is really gratifying for courts to recognize when commercial tenants are misusing the COVID pandemic to avoid their obligations under long-term leases,” Estis, said in a statement. “This case will stand as an important precedent for commercial landlords and should put to rest similar baseless claims by other commercial tenants based on these COVID defenses.”

“While we don’t have any comments or quotes at this time, we can confirm we do intend to appeal the Times Square ruling,” a Gap spokesperson told San Francisco Business Times.

Joe Dyton can be reached at joed@fifthgenmedia.com.

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