Legal Advice During Challenging Times

This clause is like an escape hatch built into a commercial lease

On Behalf of | May 13, 2022 | Real Estate Law |

When you sign a lease for commercial premises, you commit your business to pay thousands of dollars in rental fees over the next multiple years. It is common for commercial leases to last several years, and the contracts do not just disappear when you close your business or file for bankruptcy.

You could face collection efforts and lawsuits from your landlord for any rent that went unpaid even after your business had already closed its doors. You can protect yourself from that risk when you first negotiate your commercial lease by including a certain clause in the contract.

Why people add force majeure clauses to leases

Some business failures are the results of the owner or manager making the wrong choices. They get into an industry with waning public interest or run the company so poorly that even a great idea can’t help the company turn a profit. However, sometimes businesses close for reasons outside of their control.

An act of terrorism, a natural disaster, or indefinite supply chain disruptions are all matters outside of your control that could keep your business from generating profit. If you add a force majeure clause to your commercial lease, you will have the option of terminating your lease obligations in certain situations.

When the circumstances are outside of your control and prevent you from operating your business as you usually would, you may be able to invoke the protections of a force majeure clause in your lease agreement to terminate it early without incurring financial responsibility for the unpaid rent.

Learning more about ways to protect yourself and your business before you sign a commercial lease will minimize the risk of investing in a business space.