The benefit of adding a force majeure clause to commercial leases

On Behalf of | Oct 17, 2022 | Real Estate |

Many tenants signing a lease on a commercial property simply accept the forms provided by the landlord with no question. Although this approach is certainly expedient, it may leave the tenants vulnerable.

Commercial leases often impose numerous obligations on tenants. They may have some maintenance responsibilities and may pay a percentage of the shared maintenance cost with other tenants. The lease itself will likely last for several years. Tenants could find themselves in a scenario where the business may prove insolvent but there are still months left on the commercial lease.

Those trying to minimize their risks when renting a commercial space may want to negotiate with their landlord to add a force majeure clause to their lease.

What a force majeure clause does

Contracts typically impose responsibilities on both parties regardless of what other circumstances arise. A force majeure clause provides an early termination option for the tenant in limited situations.

In scenarios where circumstances outside the control of the tenant, such as natural disasters or acts of terrorism, force the closure of their business, the right terms and their lease might allow them to end the rental agreement.

Being able to void the lease and terminate any lingering responsibility for the duration of the rental agreement can be a major benefit to a company scaling back to try to avoid insolvency or preparing to close its doors permanently.

Landlords may agree to include such provisions in the lease because there are only a handful of scenarios in which such a clause takes effect. However, if such situations do arise, having the option of ending the lease early could be crucial for the struggling business or the person running the company.

Evaluating a lease is important before signing

A lease can saddle your company with financial obligations that last for years and persist even when you close your doors. It is crucial that executives and owners understand the terms of the leases that they signed and negotiate when possible for favorable closes and terms within those leases.

Carefully reviewing a commercial lease and having support when evaluating the terms of a lease can help those in need of a commercial space better protect themselves while securing facilities.

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