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Coronavirus: The Impact on Office, Retail, and Other Commercial Leases

Posted on in Real Estate

Milwaukee business insurance lawyerBy Attorney Christopher Strohbehn

Coronavirus is greatly affecting the way businesses normally operate when using leased property. Some businesses have been forced to shut down because of government-required closures, and other landlords are choosing to close properties on their own. What should a business owner consider if they are not able to operate their business in their leased space?

Obligations of the Landlord Are Independent of the Obligations of the Tenant

Landlords and tenants are reviewing their leases to determine if any remedies are available to tenants due to a business shut down caused by the Coronavirus pandemic. A normal lease will state that the payment of rent by the tenant is an obligation independent from the obligations of the landlord according to the lease. Under most common commercial leases, the tenant will not have the right to offset rent unless the lease specifically includes this right. Unfortunately for tenants, most leases state that landlords are not liable for a building’s closure or for failure to provide access, utilities or services in emergency situations, and thus an offset of rent is not required by the landlord.

Force Majeure Clauses

A force majeure clause states that the performance of the landlord's, and in some cases the tenant’s, obligations may be excused if these obligations cannot be performed because of specific acts and events that are out of the reasonable control of the party. It is important to note that a force majeure clause may never excuse the payment of rent. A force majeure clause may be helpful to a landlord or tenant if the language can be construed broadly enough to cover an inability to perform because of a global pandemic. If the COVID-19 outbreak is considered a force majeure according to the terms of a lease, the parties should pay close attention to how other provisions of the leas may be affected.

Right to Access the Premises

The parties will need to determine whether the terms of the lease state that the landlord is obligated to provide specific access to the premises. If so, the parties may also need to determine whether any exceptions exist regarding that obligation. In some case, a lease may permit the landlord to suspend services or close a building during an emergency. The interpretation of the obligations required of landlord and the remedies available to a tenant can vary depending on whether access to the building is restricted by the landlord, the tenant, or the government. The terms of each lease and the facts and circumstances that a landlord and tenant each find themselves in will determine the outcome of the problem at hand. Make sure to always check the terms of your lease!

Insurance Considerations

Many business owners are reviewing their property damage and business interruption insurance policies to determine if they will be able to claim any losses. However, these types of insurance may not cover losses arising from pandemics and diseases.

Contact a Milwaukee, Wisconsin Business Insurance Attorney Today

If you have questions about your commercial lease due to the coronavirus, make sure to contact the skilled Milwaukee real estate and business lawyers from Gimbel, Reilly, Guerin & Brown LLP as soon as possible. We will ensure that you understand your rights under your lease, and what options you have. Contact us at 414-271-1440 to arrange a consultation today.

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