How Does COVID-19 Affect My Obligations Under a Lease?

COVID-19 (Novel Coronavirus) has completely disrupted life as we know it. During this very chaotic and unprecedented time, there are certainly many questions with little to no satisfying answers. If you lease commercial space you may be wondering whether your lease is still enforceable, specifically whether you are still required to pay rent. That answer depends, in part, on the exact language contained in your lease.

Many commercial leases contain a force majeure clause in order to prepare for an act or event outside the control of the parties to the contract. A force majeure clause describes particular types of events which may excuse performance under a contract. To determine whether a certain event excuses performance under a force majeure clause, courts will first look to the language that the parties explicitly agreed to in the clause. Generally, courts will limit the application, effect, and scope of a force majeure clause to the particular language in the contract.

Some force majeure clauses except payment of rent as excused regardless of whether the force majeure clause excuses other performance. In that instance you would likely not be excused from paying rent regardless of whether the pandemic would qualify as an event excusing performance under the force majeure clause in your lease. However, other common law doctrines such as “frustration of purpose” or “impracticability of performance” may apply to a situation as dire as the COVID-19 shutdown.

Interpretations of force majeure clauses vary from state to state and can contain varying language so it is hard to determine whether the COVID-19 pandemic would exempt performance at all. In Pennsylvania, in order to use a force majeure clause as an excuse for non-performance, the event alleged as the excuse must have been beyond the non-performing party’s control and not due to any fault or negligence by the non-performing party.[1] Furthermore, the court will generally limit the use of the clause to an event specifically listed in the contract.[2] Contingencies not provided for in a written agreement will not ordinarily excuse performance.[3]

Pennsylvania courts have not interpreted a force majeure clause that excuses payment of rent regardless of whether other performance is excused under the force majeure clause. It is difficult to predict how a Pennsylvania court would rule on that issue. New Jersey, however, has ruled on that issue and has held the force majeure clause to be enforceable as written.[4] Therefore, if the force majeure clause excludes payment of rent, the tenant will still be required to pay rent regardless of whether other performance is excused.

Whether or not you are excused from performance under your lease, specifically whether or not you are still obligated to pay rent, depends entirely on the language contained in your lease and the force majeure clause. If you are unsure whether you are excused from performance, consult with a real estate attorney within your state to discuss your options.

1 Martin v. Pennsylvania, Department of Environmental Resources, 120 Pa. Commw. 269, 273 (1988).

2 See generally Sunseri v. Garcia & Maggini Co., 298 Pa. 249 (1929).

3 Dorn v. Stanhope Steel, Inc., 368 Pa. Super. 557, 571 (1987).

4 476 Grand LLC v. Dodge of Englewood, Inc., 2012 N.J. Super. Unpub. LEXIS 457, 9-10 (2012).