How do force majeure (unforeseeable circumstances that prevent someone from fulfilling a contract) provisions in a commercial lease impact the contractual obligations of commercial tenants and landlords? Force majeure provision is common in most commercial leases and excuse non-performance of certain obligations under a lease if an unavoidable or unforeseen act prevents the tenant, or the landlord, from performing. Examples of events covered by force majeure provisions include natural disasters, labor strikes, governmental actions, wars, and a catchall of unforeseeable circumstances beyond the control of the party that is impacted. If your lease contains a force majeure clause, it is important to carefully review its language to determine which events are covered. Pay particular attention whether "epidemics" or "pandemics" are considered force majeure events.
If COVID-19 is considered a force majeure event under your lease, some contractual obligations under the lease may be excused: for instance, if a tenant is forced to close its business due to a governmental decree, such tenant will not be in default under a provision that requires the continuous operation of the tenant's business in the premises. However, most force majeure provisions do not excuse or postpone monetary obligations and, in fact, many affirmatively state that monetary obligations are not excused (i.e. a tenant's obligation to pay rent, a landlord's obligation to provide a tenant improvement allowance, etc.).
Nothing found herein should be construed as an attempt to offer or render a legal opinion or otherwise engage in the practice of law. You should not rely solely on this information. We encourage our clients to work with a lawyer experienced in commercial and/or residential real estate matters as they can be complicated and confusing.
