Lease agreements are long and full of dry content. In truth, there really isn’t a way to make them more fun. 

But there are ways to negotiate and draft lease agreements to protect your rights more fully.

A force majeure clause is an especially relevant consideration in light of the COVID-19 Pandemic.

Force Majeure and COVID-19

There have been a number of cases where lessees or lessors have been unable to fulfil their obligations with respect to their lease agreements during the COVID-19 Pandemic. 

No one could have predicted that the world would change this way overnight. 

However, if you had your lease agreement reviewed by a lawyer, it may be the case that your lease agreement contains a force majeure clause.

A force majeure clause allows for contracting parties to agree on what happens to their contract upon the occurrence of an event that goes beyond the control of either party.  

For example, parties may agree to excuse or delay the performance of certain contractual obligations upon the occurrence of such an event. An example of such an event could be a “pandemic,” an “epidemic,” an “act of God,” or “the enactment of restrictive governmental laws or regulations.”

It is very important to have a force majeure clause in your lease agreement. A well-drafted force majeure clause will allow lessors and lessees some control over what happens to their contractual obligations in the face of circumstances they could not have otherwise predicted. 

If your lease agreement lacks a force majeure clause, a party seeking to get out of their lease may attempt to rely on the common law doctrine of frustration. And, if the doctrine of frustration is applied successfully, the effect is such that it voids the entire contract between the parties.

The following example describes a scenario that invokes the force majeure clause.

The Situation

Preet leased a building from Ahmed. Preet runs a daycare out of this building.

When the COVID-19 Pandemic hit, all of Preet’s kids stopped coming in for daycare. This was because the kids’ parents were now working from home and did not need Preet to take care of them for the interim.

Preet had monthly rent to pay, but was unable to keep paying it with no income coming in.

Preet tried reasoning with Ahmed, however Ahmed was not willing to compromise and demanded the rent from Preet. 

Luckily for Preet, she had her lease agreement reviewed by a lawyer before it was executed, and her lawyer was able to negotiate a force majeure clause into her agreement with Ahmed. 

The clause was written in such a way that Preet could delay paying rent during the pandemic, without breaching the contract.

When she brought this up in her response to Ahmed’s demands, he decided to back off and wait it out until Preet reopened her daycare. 

Preet and Ahmed then agreed to negotiate a way for her to spread out the outstanding rent payments across the remainder of the lease term.

The Takeaway