1. Remain attentive to the newly released government guidelines, laws, directives or orders (whether issued by CDC, federal, state or local government). Generally, absent any directive, law, or order that states otherwise or pre-empts the written agreements (leases), the agreement that you have in place will govern the relationship between the parties.
2. Is there a “force majeure” clause in the lease? Black’s Law Dictionary defines force majeure as, “An event or effect that can be neither anticipated nor controlled.” The idea is to allocate risk between the contracting parties in the event performance becomes impractical or impossible. It may relieve both parties from performance under certain circumstances. The inquiry is whether COVID-19 outbreak falls within the realms of force majeure or any other provision(s) in the lease. Generally, force majeure clauses are known to cover events such as hurricanes, floods, earthquakes or political events (revolution). Many force majeure clauses also include “pandemic,” “epidemic” or “diseases.” In the event the leases do not contain such provision, then the inquiry would be to consider a difference concept such as, “Act of God” or a “catch-all” provision. Parties should consult with an experienced counsel to review the lease and determine their options.
3. Can a tenant withhold rent due to COVID-19 outbreak? As previously mentioned, absent any federal, state, local laws, orders or directives stating otherwise, the terms of the lease agreement will govern under the circumstances. Generally, the lease will not allow a tenant to withhold rent, except when the landlord fails to provide certain services or the tenant is unable to gain access to the premises. What may be worth examining is whether a rent interruption policy would include or exclude rental losses suffered by the landlords. However, these insurance policies rarely cover losses related to diseases, bacteria, mold or other disease agents unless specifically purchased.
Information provided herein is not intended to be comprehensive nor should it be construed as legal advice. Should you wish to discuss your options related to the aforementioned issues or any other landlord tenant issues, feel free to contact our firm at 212-729-6920.