Leasing Issues

 Force Majeure:

  • Leases may include a force majeure clause that requires rent payments during a force majeure event.

  • A force majeure clause that arguably encompasses the COVID-19 crisis (e.g. a force majeure clause specifying “inability to procure and maintain insurance” where the lessee does not have insurance coverage for losses resulting from the epidemic) may protect tenants by excusing or allowing a delay in performance on the lease, i.e. timely rent payments.

 

Eminent Domain:

  • Many leases contain eminent domain clauses which may provide a basis to argue for termination or to seek an abatement under a theory that the government forcing a business to halt operations during the COVID-19 outbreak constitutes a taking.

  • Once again, it is crucial to review the specific language in the lease.

 

Go Dark Clauses:

  • Some commercial leases, particularly for retail spaces, provide a right of recapture for the landlord where a tenant shutters the business.

  • But other commercial leases may also contain a “go-dark” provision that permit commercial tenants to allow the business to “go dark” under certain circumstances, while continuing rent payments under the lease. Whether closure due to COVID-19 falls within the scope of such a clause depends on the language of the lease.

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