Commercial leases often contain a variety of unique terms. Commercial landlords and their business tenants may negotiate at length to establish agreeable terms regarding maintenance, monthly expenses and even the duration of the lease.
Frequently, commercial leases last for multiple years. They may also include special provisions about the early termination of the lease in certain circumstances. Sometimes, landlords allow commercial tenants to negotiate lease assignments. If they choose to leave the space before the lease ends, they can bring in a new tenant to take over their obligations.
Other times, landlords might agree to the inclusion of force majeure clauses. In unusual situations, a force majeure clause could allow for the termination of the lease before it technically ends.
What is a force majeure clause?
The term force majeure is a French phrase that essentially means greater power. Some people refer to force majeure clauses as “Act of God” clauses. They serve as a type of contingency for the termination of lease obligations. Highly unusual and uncontrollable circumstances could trigger a force majeure clause. Natural disasters, war and acts of terrorism are among the various scenarios where either party might invoke a force majeure clause.
What is the impact of a force majeure clause?
Commercial leases usually establish a multi-year commitment that both parties have to uphold. Tenants, in particular, may find the obligation to continue paying rent after a business fails quite challenging.
When unusual and uncontrollable circumstances prevent either party from fulfilling their obligations, they can invoke the force majeure clause to terminate the lease early. In many cases, tenants who cannot do business due to supply chain disruptions, infrastructure issues and other unpredictable circumstances may seek to terminate their leases.
Doing so can allow them to eliminate major operating expenses until the company can overcome its current challenges or move on from the failed business endeavor without insurmountable debts. Landlords unable to maintain facilities and provide amenities to tenants can also sometimes terminate leases using force majeure clauses.
Including language in a commercial lease that allows for protection in unusual circumstances can be beneficial for both landlords and business tenants. Those intending to sign a new lease or renew an existing one may want to explore custom terms that expand their legal protection.