Force Majeure Clauses In Lease Agreements

Under certain force majeure clauses, the contract ends when a force majeure event occurs. Basically, this means you don`t have to get paid (or pay the other party). Therefore, the tenant was ordered to pay only 25% of the rent – the part that represents the carryout/sidewalk activity that the tenant could still operate while the executive order was in effect. This is important because, when first analyzing a problem, courts often turn to other states and this decision in Illinois sets a favorable precedent for tenants to analyze COVID-19 closures as a “government act” and activates the force majeure provision in a rental agreement. However, some force majeure clauses explicitly identify “disease”, “disease”, “epidemic”, “pandemic” or any other similar term in the list of triggering acts. In these cases, it is quite clear that the appearance of the coronavirus would activate the force majeure clause and excuse the execution of the contract. One. Yes, but the analysis is factual and should be considered on a case-by-case basis. The exact language of the force majeure clause in question is particularly important. As with all contractual disputes, the contractual terms (a commercial lease agreement for our purposes) and the intent of the parties control a court`s analysis. Force majeure clauses only limit damage if circumstances that are not controlled by the parties have thwarted their appropriate expectations. As a result of the coronavirus (COVID-19) pandemic that has affected the country, commercial tenants are increasingly receiving notifications from their tenants requesting rent relief due to the constant evolution of protocols and mandates of federal, state and local officials.

Landlords today face the daunting task of maintaining business relationships with their tenants, as they face the immediate loss of revenue streams and with no certainty about future financial security. As Covid-19 continues to change the face of the real estate sector, it is increasingly important that landlords and tenants understand their rental rights and obligations. In the future, contractors should ensure that their commercial lease includes “viruses” and “pandemics” in the definition of force majeure and expand force majeure clauses to excuse or suspend leasing payments during the force majeure event. When negotiating and executing a larger contract, it is essential that business owners consider being represented by a lawyer, but this may be even more necessary in the current context. Lawyers spend a lot of time staying informed of updated laws and best practices, making them a good resource to protect the interests of a business owner, while the owner focuses on how the business operates in these unprecedented times. For more information on force majeure clauses, BakerHostetler has just published a customer warning entitled “FAQs: COVID-19 – Force majeure and other defenses for the performance of the contract”. If a force majeure clause explicitly lists pandemics, epidemics, infections or diseases, the coronavirus pandemic will likely be covered by the clause. The Covid 19 pandemic has led many landlords to include certain languages like “virus and epidemics” and “pandemic” in their rental agreements for new tenants and as an endorsement for rent renewal purposes. Some landlords will essentially allow an extension of the rental period.

However, most will not fully relieve the rent obligations or allow the rental agreement to be terminated in its entirety. However, this can only be done if there is a higher event over which one party has no influence. For example, a force majeure clause could compensate you for performance in the event of a hurricane, war or fire. Alternatively, the following non-monetary rental commitments can be excused by force majeure events: rental clauses (which allow you to reduce your rent if the main tenant or a number of tenants leave a retail space), go-dark-clauses (which allow you to stop operating in your space while continuing to pay the rent) and operating time conditions…