COVID-19 & Force Majeure in Commercial Leases

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Force Majeure

Most commercial, office, and warehouse leases include “force majeure” provisions that extend the time for a party to perform an obligation, or suspend the obligation, while there is a delay due to causes beyond the parties’ reasonable control. Force majeure provisions typically list specific examples, such as “strikes, riots, acts of God, and shortages of labor or materials.” Force majeure provisions typically include a catch-all provision, for example, to cover “any cause or causes, whether or not similar to those enumerated, beyond the parties’ reasonable control.” However, force majeure provisions typically exclude the payment of money by the tenant.

 

Executive orders closing bars, restaurants, and other places of public accommodation fall under the “force majeure” provision of many commercial leases, to the extent that they prevent the tenant from performing non-financial obligations, such as:

  • Opening for business by a certain date
  • Continuously operating the business
  • Maintaining minimum daily hours of operation
  • Not vacating or abandoning the premises

Executive orders directing Minnesotans to stay at home may also fall under the “force majeure” provision of commercial leases, to the extent that they prevent the tenant from performing non-financial obligations because the tenant’s employees, customers, or contractors are prohibited from doing business on the premises.

 

On the other hand, many force majeure provisions specifically exclude the tenant’s obligations to pay money to the landlord. Likewise, the provisions of most commercial leases that require the payment of money or define a financial Event of Default do not provide an exception or extension for force majeure events. Therefore, tenants generally cannot rely on the concept of force majeure to avoid or delay the payment of rent, maintenance, utilities, insurance, or real estate taxes.

 

Commercial leases may require tenants to give prompt written notice of force majeure events to landlords in order for their obligations to be suspended or deadlines postponed. Even though COVID-19 is prominently covered in the news, landlords and tenants should review their leases to identify applicable notice requirements. Source: HJ Law Firm.

 

Office Space & Warehouse Space Resources.