Signing a commercial lease is a big commitment. A business occupying an office or retail space will often agree to two or more years of rent. Landlords will often pursue full payment of commercial rent even if a business closes down and ceases operating.
Many entrepreneurs starting new businesses and those expanding existing ones must be careful when reviewing the terms of a lease. They need to ensure they do not overextend themselves or the company. Additionally, they may want to ask to include a force majeure clause as a way to protect themselves from unforeseeable circumstances.
What is a force majeure clause?
Force majeure is a French term that means “greater power.” In a lease, a force majeure clause provides a way to terminate the agreement before it would typically end. Some people refer to a force majeure clause as an “act of God” clause, but it can apply to situations obviously caused by people, including war and acts of terrorism.
If a power outside of the tenant’s or landlord’s control makes it impossible to continue doing business or maintain the space, then the lease could end early. A force majeure clause could allow a business irrevocably affected by an unanticipated issue to close its doors without incurring multiple additional years of rent obligations. Often, such clauses also apply to landlords and can absolve them of the need to provide space and other amenities in certain circumstances.
Negotiating a commercial lease and adding the right terms will make it less of a risk for those operating a business in need of commercial space.