“Force majeure” clauses in commercial leases: Can they help tenants?

“Force majeure” clauses in commercial leases: Can they help tenants?

As the pandemic continues, and financial aid starts running dry, small businesses are struggling. The hardest hit are those that rely on brick-and-mortar spaces – gyms, restaurants, hotels, shops and the like. How can you keep paying rent when you literally have no money coming in the door?

Fortunately, you may have options for staying in business without breaking your commercial lease. The first place to look for relief is in the lease itself. One clause in particular has generated a lot of buzz during these uncertain times: the “force majeure” clause.

What is it?

“Force majeure” refers to a standard provision in many commercial leases (and other types of contracts). The clause is triggered by extreme, unforeseen circumstances that prevent the parties from upholding their contractual obligations. Some leases spell out those circumstances – listing, for example, fires, floods, acts of terrorism, government action, supply shortages, labor strikes and war. Unless the clause is limited to the listed events, it’s arguable that a pandemic is sufficiently extreme and unforeseen to trigger the clause.

What are its limitations?

Unfortunately, these clauses are rarely slam dunks for tenants. They frequently do not excuse tenants from paying rent (or reduce the rent amount). In fact, they may even work against tenants, giving landlords grounds to break their end of the bargain – for example, by restricting tenants’ access to the premises due to government-mandated shutdowns, or by failing to complete improvements or construction on the premises due to the pandemic. A lot depends on the specific language of your lease.

Every situation is different, so don’t jump to conclusions without first consulting a real estate attorney. It’s well worth it to get a professional look at your commercial lease so you can better understand your options.