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The Covid-19 Pandemic, Force Majeure Clauses and Their Impact on Commercial Landlords in Georgia

Poole Huffman, LLC

Whether you’re a small landlord with only a very few commercial tenants, or a very large one that has entered into hundreds of commercial leases, it is important to recognize that details matter, and even seemingly small details may matter a great deal. Even sections of your lease that seem like mere form language should not be taken lightly, as the language you include in (and exclude from) that contract may decide whether your tenant can or cannot legally escape complying with the agreement’s terms without penalty. To make sure you are getting the right agreement to protect your business interests, you should make sure you have the right Atlanta landlord-tenant attorney working for you throughout the process.

The worldwide COVID-19 pandemic shut down every state in the union this spring. The city of Atlanta established a stay-at-home order on March 24. The state issued its order on April 2.

This, of course, meant the closure of nearly all businesses to in-person traffic, a restriction that massively impaired the ability of some businesses to generate revenues. Some commercial tenants have worked with their landlords to address problems with meeting rent obligations, but others simply have stopped paying rent. The question you, as a landlord, may wonder is… are there any situations in which they can get away with this?

Like many legal questions, the answer is… it depends. One thing upon which the outcome depends is the inclusion or exclusion of a force majeure clause in your lease agreement. A force majeure clause is a provision in the contract that conditionally excuses one or both parties from fulfilling the promises they made in the rest of the agreement. The clause also spells out what conditions will function as triggers.

Examples of things that might be included in a force majeure provision are acts of war, acts of God, certain labor strikes or perhaps an act by a governmental authority that makes continuing the tenant’s business illegal. In other words, examples of a force majeure could look like a variety of things from a terrorist bombing of Atlanta to a state law declaring all video poker and slot machines illegal… to even a worldwide disease outbreak.

Changing just one word can make a huge difference in the strength of your position

Some commercial leases specifically state that the force majeure clause does not apply to the payment of rent. Even if your lease doesn’t have that language, your force majeure clause may say the tenant is excused from paying rent only if the trigger condition makes it “impossible” for the tenant to perform. (Impossibility is a very high hurdle and your tenant will probably not be able to escape paying rent if that is the standard.) If, however, your contract simply says “inadvisable” or “impractical” to perform instead of “impossible” to perform, then that is a considerably lower hurdle for the tenant to clear.

In other words, the difference between “impossible” and “impractical” may be the difference between receiving thousands of dollars in damages for the tenant’s breach of the lease… and receiving nothing. This fairly stark example shows how changing just a single word in a commercial lease agreement can greatly expand or restrict your legal rights as a landlord.

Additionally, your tenant’s missteps may also be something you can use to your advantage. Say, for example. your lease has a force majeure clause that says that “acts of God” are valid triggers. If you can prove that the tenant’s financial woes were, at least partially, the result of human errors, then that may defeat the tenant’s “act of God” argument. In the past, for example, Georgia courts have declared damage from a lightning strike to be not an “act of God” because a homeowner’s failure to ground his house qualified as “intervening human negligence.” In other words, there may be many tools in your legal team’s “tool bag” to protect your interests as a landlord.

Whether you are in the process of negotiating a commercial lease, executing a commercial lease or litigating a commercial lease dispute, you need an experienced advocate skilled in representing landlords effectively. For that kind of powerful representation, call upon the Atlanta landlord-tenant attorneys at Poole Huffman, LLC. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.

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