Does the COVID-19 pandemic constitute a force majeure event under my lease and, if so, does that release me from my obligations thereunder?
Force majeure is a defense that permits a party to a lease to suspend or discontinue its performance of some or all of its lease obligations. What constitutes a force majeure event involves a case-by-case analysis that focuses largely on the definition of force majeure in the applicable lease and the common law in the relevant jurisdiction. Generally, it refers to an event that is unforeseeable and/or beyond the control of the parties. Many leases define force majeure by reference to a litany of significant adverse events such as terrorism, riots, government or military order, labor strikes and acts of God. If the list of force majeure events includes a pandemic, epidemic, public health emergency or similar language, COVID-19 will likely constitute a force majeure thereunder. However, even absent such language, the COVID-19 pandemic is still reasonably likely to be deemed a force majeure event if the definition of force majeure event includes acts of God, national or global emergencies, governmental orders and/or material adverse events that are unforeseeable or beyond the parties' reasonable control, as is the case in most leases. If the force majeure definition does not include any of the above language or if the lease includes no force majeure provision, then legal research will be required to determine whether the existing force majeure provision applies in a pandemic, or whether, in the absence of a force majeure provision, other relief is available.
However, it is important to note that many commercial leases provide that even the occurrence of a force majeure event does not excuse the tenant from purely monetary obligations, such as payment of rent. As such, it is critical to review the specific terms of your lease to determine not only whether the COVID-19 pandemic is likely to constitute a force majeure event, but also whether the occurrence of such an event relieves your obligation to continue paying rent.
Are evictions being affected by the pandemic?
Many courts have temporarily delayed hearing certain civil actions in favor of focusing on critical cases. Eviction and foreclosures are increasingly being temporarily barred as courts attempt to conserve resources. Each jurisdiction is handling the situation differently, and even within a particular jurisdiction, the environment is changing as the crisis proceeds.
Will courts likely enforce continuous operation obligations in retail leases against tenants that shut down operations to comply with government orders?
Many retail leases include the failure to maintain "continuous operations" or an "abandonment" of the leased premises as an event of default. In retail leases, continuous operation is a critical consideration for shopping centers in particular. Abandonment is a common law concept that generally refers to a tenant ceasing entirely its use of the rented property. Under current circumstances, it may be difficult for landlords to enforce these types of clauses. First, as noted above, there may be force majeure provisions in the lease that could, at least temporarily override the continuous operations/abandonment terms, particularly where those terms expressly cite pandemic and/or governmental action as excuses for non-performance. Second, many courts currently are not hearing civil claims involving lease enforcement or eviction.
Communication is key. Tenants should reach out to their landlords regarding their plans, particularly where the tenants' actions are not required by government order. It is important that tenants, particularly retail tenants, keep their landlord apprised of their actions in response to the virus, including temporarily ceasing operations or having all employees work remotely, so that the landlord knows the tenant is not intending to permanently vacate the premises.
This is a fluid and rapidly changing situation and these resources are current only as of the date of publication. We recommend that you contact your local Quarles & Brady attorney regarding the most up-to-date information or with any other questions regarding this subject matter, or contact
- Kevin Delorey: (813) 387-0292 / [email protected]
- Theodore Yi: (312) 715-5209 / [email protected]
- Brian Anderson: (608) 283-2694 / [email protected]