Shareholder Quino Martinez and Associate Samantha Duran discuss how a recent bankruptcy decision should serve as a cautionary tale to all commercial landlords when drafting a lease.
Over the course of the last year, commercial landlords have become all too familiar with the legal principles wielded by tenants to excuse the payment of rent. Impossibility, impracticability, and frustration of purpose have been widely cited by tenants who have argued that the COVID-19 pandemic has made it impossible for them to run their business and, as a result, to make their rental payments.
The success of these arguments has hinged, in large part, on the language of the force majeure provisions in their leases. A force majeure provision excuses a party from their obligations under a contract if they are unable to perform due to an unforeseeable event which is outside of the reasonable control of the parties.
While a force majeure provision typically does not apply to tenant’s monetary obligations, a recent decision by the United States Bankruptcy Court for the Southern District of Florida has once again reinforced the importance of clear, concise and accurate drafting when it comes to lease provisions.
In In Re Cinemex, a movie theater operator argued that its obligation to pay rent should be excused from March 20, 2020, when Florida Governor Ron DeSantis closed movie theaters, until such time as the tenant elected to reopen its business. Further, Cinemex sought reduced rent for the time in which state regulations required them to operate at 50% capacity. While the Court held that it was impossible for Cinemex to operate its business during the shutdown, the landlord argued that the force majeure provision did not excuse tenant’s obligation to pay rent, even in light of a force majeure event. The force majeure provision in the lease provided, in part: [Read more]
This is an excerpt from a blog post originally written on Lowndes Leasing Lawyers.
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