COVID-19 may be waning in intensity, but people and businesses are still sifting through the damage and grasping the new normal of remote employment, shrinking workspaces and unfulfilled leases. Because of that, the commercial real estate industry faces widespread uncertainty.
Contracts between property owners counting on rent and cash-strapped tenants whose enterprises have been devastated are being scrutinized to determine whether relationships can be salvaged.
No doubt the coronavirus caused a healthcare crisis, but what about its legal consequences?
What is “Force majeure?”
The origins of most legal languages come from Latin, but there is one classic French edict that still governs basic contract language. Force majeure, which means “superior strength,” is a common clause that covers unforeseeable circumstances that prevent someone from fulfilling a contract.
Loosely defined as an “Act of God,” the provision is designed to protect one or both parties from liability if their ability to provide goods and services is interrupted. In this evolving age of COVID-19, broad discussions are taking place about obligations, rent abatement and evictions.
Who should qualify? How long should relief be granted? And should property owners suspend business or claim their contracts were breached?
Some of those questions may be answered if there was a force majeure clause in the lease. People can mitigate the spread, but no person can control a virus. Any small business owner could argue that COVID-19 was unforeseeable when crafting a contract and unavoidable when it struck.
There may be a way to mitigate losses or negotiate a settlement that preserves the agreement.
Commercial leases are binding documents, but they also are relationships between property owners and tenants. Viewing obligations through the lens of this unprecedented hardship may provide more common ground than not.
A proactive approach to conflict and an advocate experienced in contracts and real estate law may be able to save all parties money and preserve business relationships built on trust and empathy.