New Lease Language | PandemicWith a new experience regarding a pandemic, do tenants need language in their lease to provide protection?
Overview: Lease Language and the Pandemic
With COVID-19 now in the history books, do tenants need lease language to protect them from pandemics? As everyone is well aware, the government shut-downs due to the pandemic hurt many tenants. Restaurants forced to close and other retailers un-able to make rent. The issues that came up from the COVID pandemic have changed the thinking somewhat on leases.
New Lease Languages
Previously in lease languages, there was terminology called “Force Majuere”. This has been typical in leases before 2020. Force Majuere refers to fires, labor strikes , war or a terrorist incident. Also within this umbrella are government prohibitions, natural disaster or circumstances beyond our control.
The force majuere is language that protects landlords and or tenants from being liable for lease payments and terms. Nobody really could predict that we would witness a pandemic in 2020.
Leases for Warehouses, Retail or Offices
Commercial Real Estate lawyers have to be cognizant of pandemics now. What happens if a tenant’s business is affected by a government shut-down and they cannot pay rent? Should the rent be abated? If there are forebearances allowed by a lender to the property owner, should the rent be abated for the tenant? What if the forebearance is more than 7-14 consectutive days?
What may happen with Lease Language?
Attorneys are still sorting out that has to be done regarding Force Majeure and pandemics. What will the clause look like, what should it contain? There is no real law precedent to establish what should be done yet. Most owners and tenants have not adopted any language regarding protection around a pandemic situation.
Adopting Pandemic Lease Language
Its a bit too early to tell, however with the history in place there will be a need to look at this type of situation. Most leases that have force majeure in place don’t have pandemic related language in them. It may be a good strategy to talk with your broker regarding negotiations around lease language to protect you from a pandemic re-surrgence and lock down potential.