As we navigate through these trying times, Gourjian Law Group has been receiving calls daily asking whether the COVID-19 pandemic constitutes a “force majeure” event that would excuse or suspend the performance of any obligations under a lease. Force Majeure – What Is It?
A force majeure clause generally excuses a landlord or tenant from performing certain obligations under a lease when it becomes impossible for them to do so due to unavoidable events outside of their control. Such clauses may excuse a party’s performance because of “Acts of God,” such as natural disasters like earthquakes, hurricanes, tornadoes, and floods, or also for “Acts of People,” such as terrorism, riots, and wars.
How Does It Affect Me?
Because the COVID-19 pandemic will likely be considered a force majeure event throughout most of the United States, it is important to know how your lease treats such events. Certain force majeure provisions excuse or suspend a party’s performance of all of its obligations under a lease for the duration of the force majeure event, including the obligation to pay rent. However, some provisions are drafted in such a way that they require a tenant to continue to pay rent, even if the tenant is excused from performing other requirements under the lease, such as having to continuously operate their business. It’s important to note that while there are similar clauses included in the language of many leases, there’s no such thing as a standard force majeure clause. Every lease is different. Therefore, a careful analysis of each lease is required to determine the applicability of a force majeure provision.
There’s No Force Majeure Clause In My Lease – Do I Have to Pay?
California has also codified the concept of force majeure pursuant to Cal. Civ. Code § 1511. Thus, even if a lease is silent as to force majeure, a party might be able to apply § 1511 to excuse or suspend the performance of its obligations under its lease. However, the lease must be carefully analyzed to determine whether § 1511 may be used to excuse some or all of a party’s obligations under the lease. Beyond force majeure, there may also be other equitable defenses a tenant may assert to avoid having to pay rent, such as the legal doctrines of frustration of purpose, impracticability, and impossibility. Such doctrines can also be relied upon in addition to force majeure provisions, and deserve a careful evaluation in pursuit of protecting a party’s interests.
While the number of confirmed cases of COVID-19 continues to grow, we aim to help our clients plan their responses strategically to reduce risk to their businesses. Our goal is to deliver clarity and peace of mind to our clients during this crisis. Please give us a call and let us help you understand how these issues may affect you.