Commercial lease contracts have a ton of clauses that can be confusing for tenants. You can’t negotiate every contract the same way because tenants have different needs and negotiating leverage maybe stronger or weaker depending on the size and financial strength of the company. In most cases many of the lease clauses will never have a negative affect on a tenant, however it’s important that they understand them. Some clauses will never come into play unless an extraordinary event occurs such as a Force Majeure.
What Does the Force Majeure Clause Mean?
Force Majeure is a clause that can be added to a contract that can free the parties involved from an obligation or extend the time they have to perform an obligation when an extraordinary event beyond their control (eg. earthquake, flood, etc) prevents one or both parties from fulfilling their contractual obligations.
Force Majeure in Commercial Lease Contracts
Most commercial lease contracts include some sort of force majeure clause between the landlord and tenant. Each must fulfill their obligations of the lease contract however their performance maybe excused or their time to perform may be extended in certain situations beyond their control. For example:
- The tenants ability to pay rent
- Landlords ability to deliver the space, provide services, etc.
Some examples of situations that a party might need more time or be excused are strikes, riots, acts of God, shortages of labor or materials, war, terrorist acts or activities, governmental laws, regulations, or restrictions, or any other causes of any kind whatsoever which are beyond the control of such party.
Some force majeure clauses may include pandemic, epidemic, disease, or similar terms, however if yours does not contain those it still may be triggered. For example if the government prohibits a tenant from occupying its space.
Is the Force Majeure Clause Negotiable?
Like everything in commercial lease contracts force majeure is a negotiable item. It’s one of those things that you never think about negotiating until something like a coronavirus pandemic occurs.
Keep in mind Commercial lease force majeures don’t always unbind both the landlord and tenant from lease obligations. If you are a tenant you must negotiate to have that included.
Can a Tenant Get Free Rent?
In most cases tenants are still on the hook to pay the landlords the monthly rent. Landlord attorneys do a great job of including language that excludes tenants from being able to use force majeure as a reason to not pay rent. Landlords might extend the time for a tenant to pay rent however more than likely tenants won’t be excused.
Examples of force majeures in commercial leases
Below are some real examples force majeure clauses found in a few commercial leases
Office Lease Force Majeures
#1 In the event that Landlord shall be delayed in the performance of any obligation hereunder as a result of strikes, lockouts, shortages of labor, fuel or materials, acts of God, legal or governmental requirements, fire or other casualty, or any other cause beyond the control of Landlord (collectively, “Force Majeure”), then the performance of such obligation shall be excused for the period of such delay, and the period for the performance of such obligation shall be extended by the number of days equivalent to the number of days of such delay. Landlord shall in no event be required to settle or compromise any strike, lockout or other labor disputes, the resolution thereof being within the sole discretion of Landlord.
#2 Other than for Tenant’s obligations under this Lease that can be performed by the payment of money (e.g., payment of Rent and maintenance of insurance), whenever a period of time is herein prescribed for action to be taken by either party hereto, such party shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, terrorist acts or activities, governmental laws, regulations, or restrictions, or any other causes of any kind whatsoever which are beyond the control of such party.
Warehouse Lease Force Majeures
For purposes of this Lease, the term “Unavoidable Delay” shall mean any delays due to strikes, lockouts, civil commotion, warlike operations, invasion, rebellion, hostilities, military or usurped power, sabotage, government regulations or controls, governmental actions, regulations, or legal requirements, including, without limitation, requirements of the City of San Antonio, Bexar County, San Antonio Water System (SAWS), Texas Commission on Environmental Quality (TCEQ), or Texas Department of Transportation (TxDOT); the discovery of any caves, sinkholes, endangered species or other environmental conditions subject to regulation by TCEQ, U.S. Fish & Wildlife Agency, or other applicable governmental agencies, inability to obtain any material, utility, or service because of governmental restrictions, hurricanes, floods, or other natural disasters, acts of God, weather delays, including, but not limited to, significant rainfall, freezing weather, or the effects of significant weather (i.e., muddy conditions that prohibit access to the worksite), or any other cause beyond the direct control of the party delayed (not including the insolvency or financial condition of that party or the increased cost of obtaining labor and materials). Notwithstanding anything in this Lease to the contrary, if Landlord or Tenant shall be delayed in the performance of any act required under this Lease by reason (other than the payment of Rent or any other monetary obligations) of any Unavoidable Delay, then performance of the act shall be excused for the period of the delay and the period for the performance of the act shall be extended for a reasonable period, in no event to exceed a period equivalent to the period of the delay.
Here are some other resources to check out regarding Force Majeure and the Coronavirus impact from MR LLP and BakerDonelson.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.
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