Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus. It has been affecting the brick and mortar retail business and most other real estate sectors in ways we could have never imagined. Restaurants, entertainment venues, office buildings, hospitality, and personal services have felt the financial toll.
The way business tenants and commercial landlords navigate leases has forever changed. The financial toll COVID-19 is having on the economy is causing financial strain for tenants and landlords and is opening the door to leasing provision negotiations.
Tenants and landlords attempt to protect themselves with changes and modifications to lease terms, both sides, who are partners, should remain flexible when they can as they face their challenges and navigate these new waters.
Force Majeure Clauses
Tenants should review their lease terms to check for force majeure provisions or clauses, including pandemics or public health emergencies, which may excuse a party from fulfilling their contractual obligations when extraordinary circumstances are present. It is important to note that health emergencies or disease do not typically include provisions and might not be specified in the lease. Most force majeure clauses do not excuse the obligation to pay rent or follow the lease terms.
tenant to rent abatement, but it must be determined that contamination of a building constitutes physical damage. If a tenant’s access to their dwelling is closed or eliminated due to the COVID-19 shut-downs, and a landlord can’t provide the agreed-upon services, they should review provisions to confirm whether a tenant has the right to withhold rent. It must be determined if the provisions cover any situation in which the tenant is unable to access their premises due to circumstances outside of the landlord’s control.
Health and Safety Issues
As we continue to face new safety precautions and procedures as more people return to brick and mortar buildings to work, landlords should include language related to COVID-19 to address health and safety issues in their lease terms. Landlords should disclaim warranties relating to air quality, introduce building regulations relating to common areas where a virus could be easily spread, and terms relating to tenants complying with CDC rules and regulations.
The full impact of the COVID-19 pandemic on commercial real estate won’t be known for some time. Commercial lease negotiations between landlords and tenants will undoubtedly continue for years to come. Post-COVID, it is anticipated that leases will contain language to cover a broader range of unexpected events. A landlord must be sure to specify that the force majeure will not excuse a tenant’s obligation to pay rent.
Paul J. Burkhart
The Law offices of Paul J. Burkhart, P.L. have experienced attorneys who can help you with commercial real estate leases,
Our team assists both individuals and business clients with all their legal needs, including business and Corporate Transactions, Business/Commercial and Civil Litigation, Real Estate, Intellectual Property, Family Law, Probate and Estate Planning matters. We are a full-service private law firm ready to assist you with any request, large or small. Call 561-880-0155 or visit our website.
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Phone: (561) 880-0155
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