Force majeure has become a hot topic in the real estate community amid the COVID-19 pandemic as parties look to see if such contract clauses may help or harm them. Lawyers say keeping a few key strategies in mind can go a long way.
The clause, which appears frequently in contracts, excuses parties from certain responsibilities and obligations due to events that are deemed to be out of the realm of control, although most do not mention pandemics.
Landlords and tenants are closely scrutinizing their contracts as tenants are having trouble making rent payments and landlords need to make mortgage payments, and property owners and construction contractors are also reviewing their documents to see how force majeure might play out.
Here, Law360 looks at four force majeure tips for real estate lawyers amid the COVID-19 pandemic:
Look Beyond Force Majeure for Rent Problems
Read Construction Contracts Closely
Try Working Out Disputes, But Also Prepare for Court
Don't Jump to Conclusions
Bonnie Hochman Rothell was called for comment on this issue and states clearly: wording matters.
"In general, the inability to pay rent is not generally considered a force majeure event," said Bonnie Hochman Rothell, a partner and chair of the litigation practice at Morris Manning & Martin LLP. "It's hard to talk about force majeure alone. There are a lot of other things that are impacting the real estate arena now."
"Where it's more likely to come into play ... is in the construction world, when the supply chain is being altered," Hochman Rothell said. "I think that's where force majeure is more likely to be triggered."
"In general, force majeure is a unique doctrine that is very, very specific to the contract at hand. ... I'm telling clients to look at both force majeure clauses as well as state doctrines that may apply," Hochman Rothell said.
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