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How Force Majeure provisions in commercial real estate leases are changing because of the Covid-19 pandemic

On Behalf of | Feb 14, 2022 | Business disputes, Franchise Law

The pandemic has impacted just about every part of our lives. That includes businesses, which had to deal with staffing issues, supply chain delays, inflation, regulations, and countless other obstacles. One or a combination of these factors may have impacted your ability to meet the obligations of a business agreement.  A force majeure clause may provide a legal defense to claims based on failure to meet contractual obligations.

What is a force majeure clause?

A force majeure clause excuses contractual performance under certain unforseeable or unavoidable circumstances.  Depending on the specific language in a force majeure clause and the case law in the jurisdiction applicable to the contract, a government shut-down order or restriction may be a basis for excusal to perform under the force majeure provision of a contract.

Commercial real estate faced many obstacles

Recently, many businesses have argued that the language in the force majeure clause of commercial leases includes COVID-19 and that COVID-19 constitutes an occrurence required by force majeure clauses.  Most often, force majeure clauses in commercial leases do not excuse non-payment of rent.  Force majeure clauses may excuse failure to keep a business open during specific hours.

Landlords may be able to rely on force majeure clauses to excuse delays in construction and build-out of commercial spaces for tenants, if supply chain issues delayed delivery of materials or equipment.

If you have questions about your lease, a real estate attorney can help.

More relevant than ever

Due to the ongoing uncertainties in the current pandemic era, force majeure clauses are receiving a lot of attention from business owners and their attorneys and these clauses and other defenses to enforcement for non-performance are as relevant as ever.  Some new contracts now add pandemics, epidemics, health crises, and government shutdowns to a long list of force majeure events, including invasion, flood, acts of terrorism, hurricanes, war, and other natural disasters or man-made events.

Property owners and business owners should be mindful of force majeure contracts in negotiating current disputes and new or renewed contracts and leases.  The legal landscape continues to change and litigators and drafters of force majeure provisions are learning more from recent court decisions and panels of experts.