Force Majeure Considerations in Retail Leases

COVID-19 has profoundly impacted retail around the world. Federal, state and local governments have implemented an array of restrictive laws, orders and regulations, including mandatory business closures that prevent retail stores from opening their doors. Because of their inability to operate from their leased locations, many tenants have analyzed their leases to determine whether they remain obligated to pay rent during this uncertain period, while many landlords have undergone the converse analysis to determine whether they may require tenants to continue their payments. For landlord and tenant alike, that analysis frequently begins — and often prematurely ends — with the “force majeure” provision. At first blush, the FM clause (sometimes titled “unavoidable delays” or the like) may initially seem to resolve the issue. But in many cases, the generic nature of these clauses and the particular effects associated with the pandemic make the analysis more nuanced than at first it might appear. Retail landlords and tenants should be sensitized to these nuances as they evaluate their respective positions concerning the enforceability of rental obligations. We explain below. COVID-19 AND FORCE MAJEURE CLAUSES A FM clause generally excuses a party’s nonperformance when specified events hamper a party’s ability to fulfill its contractual obligations. These

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