Commercial landlords and tenants are encouraged to closely review their lease documents to determine (1) whether, and to what extent, the COVID-19 events, declarations and restrictions qualify as a force majeure performance excuse under the applicable lease, and (2) any applicable requirements for providing notice of nonperformance under that lease. Force majeure provisions are included in many commercial leases and generally operate to excuse a party’s nonperformance when an event outside of the party’s control prevents them from fulfilling their obligations under the lease. Whether these types of events qualify as force majeure under a lease depends largely on the specific language of the provision.

Landlords and tenants should review their leases to determine the following:

• Is there a force majeure provision?
• Is the force majeure provision applicable to these COVID-19 events?
• Does the force majeure provision excuse performance by the landlord, or by the tenant, or both?
• Does the lease specify within how many days of the party’s knowledge of a potential delay or non-performance a landlord must provide notice to a tenant? If unspecified, notice of any delays or nonperformance should be provided to the other party as soon as possible.
• Does the force majeure clause permit a party to terminate the lease?

Landlords and tenants should anticipate that force majeure provisions will likely not excuse the timely payment of rent. However, both parties should confirm the language of the applicable clause, because landlords can expect tenants to request rent relief. Landlords will want to know what their lease requires in evaluating those requests.

Other areas to which force majeure provisions may be applicable and which the parties should consider would include:

• Are there timelines or deadlines for construction of tenant improvements? What if permits or materials are delayed or not available?
• Does the lease require a tenant to be open and operating continuously and/or during certain times and hours?
• Does the lease require a landlord to keep the building open?
• What services does the lease require a landlord to provide?

The specific wording of the lease will be essential when reviewing a force majeure claim and preparing a proper response to any delays in performance.

Click here to read more about commercial contract considerations during the pandemic.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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