With our daily lives changing constantly during the current COVID pandemic, unforeseeable circumstances may prevent real estate owners and tenants from being able to complete the duties outlined in their rental contracts. This situation is referred to as Force Majeure, a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance happens beyond the control of either party.
In this case, specific legal actions can be taken to help a defendant claim relief from this particular provision, especially right now.
Given the current state of the economy, most businesses in California are being affected by COVID, but in different ways. While some may be able to complete their obligations to their original real estate contracts, others may find it difficult, which is why seeking legal representation for your situation may be one of the best routes you can take.
What Instances Constitute Force Majeure?
In order for an event to meet the criteria of Force Majeure it must:
- Be outside the scope of control by the party affected
- Prevent, hinder, impede, or stop the abilities of the party to complete the obligations created in their contract
- Persist to hurt the party’s ability to complete duties of a contract even after all measures of prevention, avoidance, and mitigation have been taken in response to the event
If you are in a situation in which the effects of an uncontrollable event, such as COVID-19 closures, prevent you from fulfilling your obligation to your real estate contract, you may be able to use Force Majeure as a way out. It is advisable, however, to pursue that direction with the help of a lawyer.
Since most businesses are affected by the coronavirus pandemic, you may be wondering if a solution to your Force Majeure case could be reached in a timely manner. As with most real estate litigation, it depends on your specific circumstances and the line items in your original real estate contract.
What should I look for in my original contracts to help my case?
If your original contract lists diseases, pandemics, or epidemics as reasons for Force Majeure, this can contribute to your case in regard to real estate obligations that cannot be met due to the coronavirus pandemic effects.
It is important to note, however, that if your business is seeking Force Majeure due to COVID-19, the coronavirus itself may not be suitable to claim as a relative event, rather the consequential events of it have contributed to an inability to fulfill obligations to real estate contracts.
Other events that may be noted as Force Major constituents may include:
- Natural disasters
- Destruction of property
- Political or legal impairments
What can a Force Majeure do for me?
A Force Majeure effectively releases a party from its contractual obligations, whereas without one, a breach of contract would be filed. This provision will save you from negative repercussions of your failure to meet your contract obligations by proving that it was out of your control.
To support your claim further you will want to be able to prove:
- That there is a direct link between the event and your inability to meet contract requirements
- That the effects of the event were substantial enough to cause an overwhelming disruption to your ability to fulfill your contract
- Measures were taken to mitigate the outcome of the inability to meet contract requirements and that it has continued to persist
If you are able to prove these items with substantial evidence, there is a likely chance that you will achieve positive results.
In Relation to COVID
With most cases of real estate litigation due to COVID, Force Majeure can be claimed and proven fairly directly. In situations like being mandated to isolate due to outbreak in or near your office, this could have a substantial impact on your business as a whole which may be a completely feasible claim.
Due to the volume of businesses affected by the pandemic, claims for Force Majeure are rising, which makes it ever more important to ensure that you meet most, if not all, of the constituents before beginning your claim.
What does this mean for my commercial real estate obligations?
The circumstances of COVID-19 warrants Force Majeure in most instances and the government has already put enforcements into place in many areas which acknowledge that, such as not allowing evictions for tenants who cannot pay rent, or leniencies on the amount of rent that a tenant is required to pay.
Business Performance For Your Case
In order to prove that an event is relevant to Force Majeure, you must be able to prove that your business has been negatively affected by the event, causing the inability to meet contractual requirements.
In many cases, rent payment obligations made before any government orders were put into effect must be fulfilled. However, if a landlord is still pressing for the completion of rent obligations after the fact, get in contact with an attorney to help your case for Force Majeure. If your business has completely halted operations or is working under limited capacity, you may be excused from a portion, if not all, of your rent obligations during this time.
Who should look to Force Majeure for exemption from real estate contract obligations?
- Businesses that have completely halted operations due to government stay-at-home orders and cannot pay rent
- Businesses that are working at limited capacity and can only afford to pay partial rent
- Businesses that have been evicted due to non-payment after a government stay-at-home order has been made
Does your business need help to claim Force Majeure for the inability to fulfill real estate contract obligations? Get in contact with us today! Our attorneys live and practice in Ventura, Santa Barbara, and San Luis Obispo counties. We are a client business service and provide prompt and cost-efficient legal services with a specific expertise in estate planning.