Earlier this year, in Classic Restaurant Concepts, LLC v. President and Fellows of Harvard College, 104 Mass. App. Ct. 323 (2024), the Appeals Court of Massachusetts ruled that a landlord’s construction project that caused the closure of a street in front of a tenant’s premises could potentially constitute a breach of the lease’s implied covenant of good faith and fair dealing, as well as the covenant of quiet enjoyment.

In September 2015, The President and Fellows of Harvard College (“Harvard”) entered into a lease with Classic Restaurant Concepts, LLC (“Classic”) for the operation of a high-end restaurant at 8 Holyoke Street in the Harvard Square area of Cambridge. During the lease negotiations in late 2014, Harvard had informed Classic that it planned to construct major renovations to the nearby Holyoke Center, set to begin in April 2016 and continue through 2018. Despite this knowledge, Classic signed the lease and, after completing construction of the premises, began operating its restaurant, “En Boca.”

In early 2016, in connection with Harvard’s renovation of Holyoke Center, Harvard got permission to close Holyoke Street located directly in front of the leased premises until the summer of 2018. Classic testified that the “….construction made Holyoke Street ‘a war zone.  The street you couldn’t get down.  Even our sidewalk, the fence was only a couple of feet wide.  It was hard to get to the restaurant.’”

Consequently, the restaurant ceased operating only a few months after it opened. Classic subsequently filed a lawsuit against Harvard, claiming the street closure directly interfered with its business and significantly contributed to its demise.  Classic testified that, “the type of customer it was trying to attract did ‘not want to go down a closed street.  It needs to feel good.  It needs to be warm and welcoming.’  The fact that cars could not drive by the front of the restaurant to drop off patrons ‘crushed the business.’”  Classic also cited to expert testimony that the closing of a one-way street has ‘a significantly negative impact on retail, especially restaurant, sales on that street.  When a street is physically closed, or even when customers have the perception that it might be closed when they get there, that closing will result in both visibility and accessibility being significantly diminished.’”

In its lawsuit, Classic argued the street closure violated the implied covenant of good faith and fair dealing, and the covenant of quiet enjoyment under the lease. The trial court ruled in favor of Harvard, granting summary judgment on all claims, ruling that, among other reasons, Classic was aware of the planned renovations and signed the lease anyway and that nothing in the lease required Harvard to prevent the street closure. The Appeals Court disagreed.

In analyzing the covenant of good faith and fair dealing, the Appeals Court ruled that Classic’s general knowledge of the renovations did not equate to specific knowledge of or the acquiescence to the street closure.  There was nothing in the record to indicate that Classic should have reasonably expected the street closure.  Further, Classic was not claiming that Harvard had to prevent the street closure, but rather that it was impermissible for Harvard to cause the street closure.

The Appeals Court further held that if the street closure seriously interfered with Classic’s tenancy or deprived Classic of the reasonable access that Harvard knew Classic needed to operate a high-end restaurant, then Harvard could be found to be in violation of the covenant of quiet enjoyment.  Consequently, the Appeals Court reversed the summary judgment, sending the case back to the trial court.

This case underscores the importance for landlords to carefully draft lease terms to address all potential development and renovation issues that may arise during a retail lease term. Conversely, tenants should proactively negotiate for provisions that protect against substantial disruptions to access, visibility, or use of their premises.