A commercial lease is an executory contract. Both parties have long-term obligations to one another after signing the lease. Either party can potentially take legal action when the other fails to uphold their obligations.
It is therefore important for both landlords and tenants to ensure that the lease documents contain appropriate terms. Tenants and landlords alike often focused on terms related to the duration of the lease, the amount of rent and the allocation of maintenance responsibilities. There are also many secondary clauses that landlords and tenants can include in a lease to protect themselves.
A lot can happen in the two to five years that a typical commercial lease lasts. Sometimes, either the tenant or the landlord may become unable to continue the lease. In such circumstances, disputes may arise related to the financial and practical obligations that the parties have to one another. A force majeure clause integrated into a commercial lease can be beneficial for both the landlord and the tenant.
What does a force majeure clause do?
The term force majeure is a French phrase that means “greater force.” Some people refer to force majeure clauses as “act of God” clauses. It is essentially an emergency escape clause added to a lease to protect tenants and landlords from costly obligations that they cannot continue to fulfill.
If powers outside of the control of the tenant or the landlord prevent them from continuing to operate the business or maintain the facilities, that situation may trigger the force majeure clause in the lease. They may be able to terminate the lease early to avoid legal and financial complications. A force majeure clause can provide protection that is mutually beneficial for both the landlord and the tenant.
For tenants, force majeure clauses are a form of protection against months of rental payments accruing while they are unable to operate the business due to inaccessible facilities, supply chain disruptions and other extenuating circumstances. Similarly, for landlords, force majeure clauses eliminate the risk of tenants taking legal action due to an inability to use leased facilities as intended.
Customizing the language included in a commercial lease can be an important part of the lease negotiation process. Seeking legal guidance can help commercial landlords and tenants when they review the existing lease and help them integrate terms that extend appropriate protection.
