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A force majeure clause in your lease can protect your business

On Behalf of | Jul 30, 2021 | Bankruptcy |

Negotiating a commercial lease can be an important step for business owners. Your lease may last for years and could tie you to a property even after your company continues to grow and needs more space.

The long-term lease often required to secure a commercial space can also put you at risk if the company closes or goes under. Typically, there are limits to how much rent you can discharge in a business bankruptcy.

Thankfully, you have the opportunity to protect yourself from financial losses due to unexpected business failure or closure with the inclusion of a special clause in your lease.

How a force majeure clause works

Tenants can usually only end a lease when the agreed-upon term is up or when the landlord agrees to an early termination. Otherwise, the landlord can still hold the business responsible for any unpaid rent, even if the company goes out of business or has to halt operations because of extreme circumstances.

A force majeure clause can protect your business from the obligation to keep paying rent in certain situations. If your business has to close or cease operations because of factors outside of your control, you may be able to invoke the force majeure clause.

Essentially, if natural disasters, terrorism or other extreme, uncontrollable circumstances force your company to close, the force majeure clause will allow you to terminate the lease with minimal financial consequences.

You will probably need to ask for a force majeure clause

As you might imagine, many landlords don’t like giving their tenants ways to break their leases without financial consequences. There likely won’t be a force majeure clause in your lease unless you specifically ask for one while negotiating with your potential landlord.

The more you know about how to protect your company in a commercial lease, the more confident you may feel when you eventually sign one.