Skip to main content

Terminating A Business Lease Because Of The Coronavirus

terminating a business leaseIf your business has been ordered shut down by the government during the coronavirus because it is allegedly “non-essential,” you may be able to terminate your commercial lease.

I’ve previously discussed business owner rights under force majeure clauses in leases and other contracts. However, there are other provisions that may apply too. For example, some business lease agreements have provisions that cover eminent domain.

Now it will undoubtedly be litigated in courts whether or not pandemic shutdown orders constitutes a taking that requires government compensation. But that’s not the most important issue.

In fact, the key thing to know is the meaning of the exact language used in the eminent domain lease clause(s). For example, some are written in such a way that a lease automatically terminates if at least XX% of the leased premises becomes unavailable because of the government’s actions. Other clauses state that the tenant has the option to terminate if such an event happens, i.e. lease termination isn’t automatic but requires the tenant to give notice.

Are all eminent domain clauses written this way? No. But enough are that it’s worth reading your lease agreement if you’re a business owner struggling to make ends meet because of the coronavirus pandemic orders. If nothing else, the language in your lease (force majeure, eminent domain, etc.) may be give you some bargaining chips you wouldn’t otherwise have when trying to renegotiate to receive more favorable terms instead of terminating the lease.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

More posts by Mike Young, Esq.