The Hookah Lounge That Never Was: Not Every Breach Ends a Lease

A landlord threatened to change the locks. Furniture remained inside the leased premises. The superior court viewed those facts as a material breach of the lease and ordered the return of $33,000 paid by the tenant at signing. The New Hampshire Supreme Court reversed, holding that neither circumstance substantially impaired the tenant's right to possession.

The lease and the attempted termination

A tenant leased a commercial building in Hampton Falls for five years. Tenant paid $33,000 at signing for the first month's rent, last month's rent, and a security deposit.

The lease allowed a lounge "or any other use permitted by law." It made Tenant responsible for obtaining the necessary permits and approvals and required Landlord's written consent before Tenant undertook improvements or fit-up work. Tenant wanted to open a hookah lounge.

The lease also gave Tenant the right to terminate if he could not obtain an occupancy permit after exhausting all available "avenues and remedies," but he would forfeit rental payments already made.

After signing, Landlord's principal repeatedly threatened to change the locks unless Tenant signed a separate document containing additional terms the parties had negotiated prior to signing the lease. Tenant never signed the document, but Landlord gave him a key and never followed through on the threats.

Furniture and other items remained inside the building. The lease was silent about the disposition of the furniture.

Eight days after signing, Tenant notified Landlord he was terminating the lease. He asserted a hookah lounge was not a permitted use and Landlord had denied possession by leaving personal property throughout the building. He demanded the return of the $33,000. ‍

Landlord kept the money and later leased the property to someone else. Tenant then sued to recover the $33,000 and Landlord counterclaimed for unpaid rent.

What makes a breach material? ‍

Not every breach of a contract is a material breach. The distinction matters because a material breach may give the other party the right to stop performing under the contract.

Under New Hampshire law, a breach is material if it involves a substantial failure to perform, defeats the contract's purpose, or concerns a promise the parties regarded as vital to the agreement.

A party need not prove damages to establish a material breach, but a lack of resulting harm may help show that the alleged breach was not material.

Therefore, the issue in this case was not whether Landlord's conduct was contentious, frustrating, or inconvenient. The issue was whether it substantially impaired Tenant's right to possess and use the property under the lease.

The threatened lockout did not deny possession

Landlord repeatedly threatened to change the locks. But Landlord did not change them. Tenant continued to have access.

On those facts, the Court distinguished a threat to interfere with possession from an actual denial of possession. Because the threatened act never occurred, it did not substantially impair the access Landlord had promised Tenant.

The furniture caused no material interference ‍

The furniture required a different inquiry. It was physically present, but its presence mattered only if it substantially interfered with Tenant's ability to use the property as the lease allowed.

The record showed no such interference. Tenant could not begin meaningful fit-up work until he obtained local approvals and Landlord's consent. The record did not show that he had obtained either.

The Court thus measured materiality against what Tenant was actually entitled and prepared to do at the time. Because unsatisfied prerequisites already prevented the proposed work, the furniture did not substantially impair Tenant's present use of the premises.

Tenant also conceded on appeal that the space remained usable and that the furniture did not materially impede occupancy. That concession reinforced the absence of the practical interference required for a material breach.

The result

The Supreme Court reversed, holding that neither the lockout threats nor the furniture amounted to a material breach of the lease. Because Landlord had not materially breached the lease, Tenant was not entitled to terminate it on that basis.

After ruling the landlord had not materially breached the lease, the Supreme Court sent the case back to the superior court to address Landlord's claim for unpaid rent.

How that plays out will be interesting, given Landlord already re-let the building.

Key takeaway

In this case, materiality turned on practical effect. The unfulfilled lockout threats did not reduce Tenant's access, and the furniture did not prevent work Tenant was then authorized and prepared to perform. Without a substantial impairment of a vital lease obligation, the alleged conduct did not rise to the level of a material breach.

Abdel-Hadi v. ZJBV Properties, LLC, No. 2025-0172 (non-precedential order) (N.H. Aug. 26, 2026) (Because the Court issued an "order" rather than an "opinion," the ruling has no precedential authority over other cases, but it may provide guidance on how New Hampshire courts may approach similar issues in the future.)

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