Where Commitment To Quality Still Makes A Difference

  1. Home
  2.  | 
  3. Commercial Real Estate
  4.  | How a force majeure clause alters a commercial lease

How a force majeure clause alters a commercial lease

On Behalf of | Dec 7, 2023 | Commercial Real Estate

A commercial lease is a business contract that could be worth tens of thousands of dollars or even more than that. A business leasing a commercial property will often pay far more per square foot than residential tenants do. They are also likely to accept a much longer term for a lease.

A commercial lease will usually last at least two years, and leases that remain in effect for three to five years are quite common. Some landlords even negotiate leases that last for a decade. All of those months of rental payments can add up to a significant financial commitment for the tenant and a major source of revenue for the landlord.

Both parties will want to protect themselves from unexpected expenses and losses in the future. A force majeure clause can be a way to limit the risk involved in signing a commercial lease.

What is a force majeure clause?

The average lease contains dozens of separate clauses discussing everything from maintenance to the severability of different obligations. A force majeure clause is not a standard inclusion in boilerplate documents. Either the landlord or the tenant must request such a clause.

A force majeure clause outlines a scenario in which either party could absolve themselves of responsibility to the other. Some people may refer to this as an “act of God” clause. Essentially, a force majeure clause forgives either party for contractual responsibilities when circumstances outside of their control cause a default.

An example would be when an act of war or a natural disaster force a business to shut down. The tenant could rely on the force majeure clause in their lease to negate their obligation to pay rent. When a landlord cannot continue maintaining facilities the way a tenant requires, they could also benefit from a force majeure clause if the factors causing the issue are outside of their control.

Given that the clause provides benefits to both parties, either a landlord or a tenant can potentially propose the inclusion of a force majeure clause when negotiating a rental agreement. Instead of simply signing boilerplate documents, landlords and tenants negotiating commercial leases will often benefit from the creation of customized documents.

Including the right terms in a commercial lease can minimize the overall risk involved in acquiring or providing commercial space.