Attorney Tim Mortimer discusses the timeliness of “Force Majeure”
2020 has taught us that landlords and tenants, alike, have been ambushed by unforeseen circumstances. As business closures occurred, commercial tenants were unable to pay their rent. Without monthly rent payments, landlords have been unable to pay their mortgages. In some cases, landlords have been willing to work with tenants because doing so was slightly more advantageous than trying to find a new tenant during the pandemic. But in many more cases, businesses have closed for good and commercial tenants have simply abandoned their leases. Many businesses, especially small businesses, have leases that are personally guaranteed by the businesses’ owners. While landlords may feel some comfort from this, a personal guaranty is still only effective if the guarantor has resources to back up the guaranty. Unfortunately, most personal guarantors of a commercial lease derive all of their resources from the businesses that just closed, and they face individual bankruptcy as well.
The most common negotiations over commercial leases that I’ve seen this year are negotiations over “force majeure” clauses that specifically include pandemics. The respective bargaining power of the parties is often the determinative factor in whether such a force majeure provision is included in a lease or any other type of contract. Nobody can foresee every type of circumstance that could cause disruption to a business. But, in 2021 and beyond, trying to protect against the unforeseen will be on everyone’s mind.
Read more of our information about “Force Majeure” as it applies to contracts and leases by clicking Here.
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Author: Tim Mortimer
Tim Mortimer is a business attorney for over 24 years, helping small and large companies alike incorporate, merge, sell and resolve disputes. He is licensed to practice law in New Mexico and Arizona.