The Leasing Hotline

The landlord failed to obtain all necessary permits by the stated time and notified the tenant that the failure was the result of a force majeure. It claimed that its failure to obtain timely permits was related to the town's extortionate and illegal demands. The tenant elected to terminate the lease, and the landlord commenced an action against the tenant for breach of the lease.

The court found in favor of the tenant, holding that the landlord's failure to obtain the necessary permits was not a force majeure, but a foreseeable governmental delay. It considered that the landlord did not even commence the permit application process until only 1 week before the deadline stated in the lease and that the landlord knew or should have known that the permit application process would take more than 1 week. It further held that a force majeure clause only applies to events beyond the parties' control and that the permit application process was well within the control of the landlord.

CONDITION PRECEDENT

A tenant is entitled to terminate a lease where the lease contains a condition precedent that permits either party to terminate without penalty if the condition is not fulfilled and if performance of the condition was well within the control of the landlord and not a force majeure event. Morgantown Crossing, L.P. v. Manufacturers and Traders Trust Company, Civil Action No. 03-CV-4707, U.S. District Court for the Eastern District of Pennsylvania, Nov. 10, 2004.

The parties entered into a 20-year ground lease. The landlord was to arrange for construction of the site and for site preparation and improvements at its own expense. After the site improvements, the tenant would construct a building for use as a branch office. A condition precedent in the lease required the landlord to obtain all necessary governmental permits by a certain date. The lease provided that if this condition was not fully satisfied by that date, either party could terminate the lease without penalty or other liability. The lease also contained a force majeure clause providing that neither the landlord nor the tenant would be in default if their performance was delayed by “strikes, lockouts, inability to obtain labor or materials on the open market, war, riots, unusual weather conditions, acts of God or other similar causes beyond their control.”

The landlord failed to obtain all necessary permits by the stated time and notified the tenant that the failure was the result of a force majeure. It claimed that its failure to obtain timely permits was related to the town's extortionate and illegal demands. The tenant elected to terminate the lease, and the landlord commenced an action against the tenant for breach of the lease.

The court found in favor of the tenant, holding that the landlord's failure to obtain the necessary permits was not a force majeure, but a foreseeable governmental delay. It considered that the landlord did not even commence the permit application process until only 1 week before the deadline stated in the lease and that the landlord knew or should have known that the permit application process would take more than 1 week. It further held that a force majeure clause only applies to events beyond the parties' control and that the permit application process was well within the control of the landlord.