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New Strategies for Renegotiating Office Leases Post-COVID

By David Leffler and David Jacoby
July 01, 2020

During COVID-19, industries, business models and interpersonal rules all have shifted dramatically, thrusting a knife into the hearts of many businesses. Those businesses often have leases for office or retail spaces which were a valuable part of their business model in a pre-pandemic environment, but now, suddenly, these leases are burdensome and unusable.

We believe that current circumstances present an opportunity for tenants to use new strategies to renegotiate or even terminate leases. This article looks at conventional legal strategies that may provide grounds for lease termination before turning to consider another, third, approach. We begin with a look at conventional legal strategies that may provide grounds for lease termination before turning to consider another approach.

The First Ground: Contractual Law

As always in a contract context, inquiry starts with the agreement's language. Two frequently occurring lease provisions address force majeure and quiet enjoyment.

Force majeure contract clauses have become a central focus for tenants looking to terminate office leases. These clauses provide that under limited, stated circumstances, one or both parties will be excused from performance under a contract. Courts interpret these clauses narrowly, which means that if there is not an explicit reference to the cause for non-performance in the force majeure clause, such as a reference to bacterial or viral infections, then there will be no excuse for failure to perform under that clause. Beyond that, the force majeure event must actually prevent a party's performance, not just make it uneconomic.

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