Despite Governor Cuomo’s Executive Order 202.8 requiring non-essential businesses to reduce in‑person workforce locations by one hundred percent (100%), businesses may find some relief from performance under their contractual obligations. Below are some avenues that may potentially provide relief for businesses:
Force Majeure in a Lease. A force majeure provision in a commercial lease allows for suspension of performance by either party because of certain specified unforeseen events. The clause may be invoked to allow a landlord or tenant to suspend performance of a time‑sensitive obligation, such as a “build out” obligation requiring a landlord or tenant to timely complete construction, and thus stall the commencement date of the lease. For more information regarding force majeure clauses, please see our companion alert here.
Rent Abatement. A force majeure clause likely will not provide for the suspension or abatement
of rent payments, as payment of rent is typically an independent obligation (unless you are able to
stall the lease commencement date or the tenant is restricted from accessing the leased premises).
Whether the lease allows for rent abatement when the government has caused the restricted
access will depend upon the language included in the lease. Even if a lease agreement does not
provide for rent abatement or suspension, landlords and tenants could come to a separate
agreement to temporarily provide rent abatement or suspension. Landlords and tenants should be
proactive and openly communicate with each other to mitigate the impact of the COVID-19
pandemic and reach a solution benefitting both parties.
Relief of Contractual Obligations during the Coronavirus Pandemic (04-03-20)_Alert
For guidance on the ever-changing laws that may affect your business reach out to Jamie Batt and our Business Law Team.