What’s that funny French word? Force Majeure. It roughly translates to “major” (as in overwhelming) force. What’s it for? Unforseen circumstances, big events like strikes, wars, acts of terrorism or large natural occurrences like hurricanes, earthquakes, tornados–that sort of thing. It excuses you if any of these occurrences make it impossible to meet your contractual obligations. Okay, fine, whatever, stick it in the back of the lease.
Now, with the Covid 19 pandemic, more commercial tenants are becoming aware of this provision. Guess what? In most cases, you still have to pay rent no matter what. The majority of leases after all are written by the Landlord’s counsel. I have recently been negotiating new leases and although a pandemic is accounted for, the Shopping Center still wants my client to pay rent in the event of a “Force Majeure” event. That is helpful to no one. Rent can’t be paid if the government shuts down your business or limits you to curbside business. Impossible is as impossible does. On the Landlord’s side, what is it going to do? Evict? And then who will be the new tenant during or after the pandemic while the economy is still reeling?
This is an unprecedented event. It could be very beneficial for you to review the Force Majeure provision in your lease agreement. The directive to pay rent under any circumstances may not be in there. I doubt very much that global pandemic is included as a Force Majeure event but there may be language so a good faith argument can be made that the provision covers the pandemic. In any case, communication with the Landlord is important. If rent can’t be paid, it can’t be paid. Negotiation is always better than litigation. Depending on where you are located in Virginia, the courts are shut down or seriously slowed. They all may be shut down at some point. When contacting your Landlord however have your ducks (legal and financial) in a row. Know your rights under your lease and be able to show your financials in regard to the drop off in business in a clear, concise and easy to understand manner.
Additionally, take a look at your insurance. There may be relief under the business interruption provisions. Not surprisingly, the insurance industry is balking at this. Again, know your rights. You contracted for them and paid for them.
Finally, look for the relief programs that are out there and more are coming. You may be able to get low interest loans for pay roll and rent. Some loans for payroll may be forgiven. Here are some helpful links.
https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
https://www.sba.gov/document/support–express-bridge-loan-pilot-program-guide
Stay well. Stay safe. It may feel like the end of the world. It is not. Call me. I am providing complimentary telephone and video conferences during this difficult time.