Does Force Majeure apply to the leasing of commercial property?
Some commercial tenants have queried whether the current situation is a force majeure which may allow it to terminate the lease. Clauses which allow a party to terminate a lease for a force majeure event or, to put it another way, an “act of God”, are however extremely rare in modern commercial leases. Even if there is such a provision in your lease, it would need to be drafted to apply to an outbreak of disease.
Related FAQs
Initially, the relaxation applied to supermarkets and food suppliers. This was subsequently widened to apply to other businesses, permitting them to collaborate where necessary to respond to the crisis in the interests of consumers.
Yes. The Town and Country Planning (General Permitted Development) (Coronavirus) (England) (Amendment) Order 2020 came into force on 9 April 2020 giving permitted development rights for emergency development. The permitted development right is available to local authorities and health service bodies (as defined) on land owned, leased, occupied or maintained by it for the purposes of:
- Preventing an emergency
- Reducing, controlling or mitigating the effects of an emergency
- Taking other action in connection with an emergency
It could cover, for example, the temporary change of use of buildings into a Nightingale Hospital or the establishment of a testing centre.
The permitted development right is not permitted in certain instances and is subject to a number of conditions including the notification of the local planning authority and the cessation of the use before 31 December 2020.
Further detail of the permitted development right is available at the link below.
- Working with PFI providers to get contingency plans up to date
- If a PFI provider is struggling to achieve service delivery requirements due to Covid-19, then local arrangements should be put in place to:
- maintain unitary charge payments
- revise contract requirements/standards
moderating payment and performance regimes where appropriate.
- In any event, you may wish to review and adjust your requirements to reflect the current situation. It is possible that some requirements can be relaxed, whereas others need to be tightened. For example, there may be an increased need for cleaning and maintenance in certain areas of your PFI premises or the layout of the premises and/or room uses may have temporarily changed. With staff illness and shortage likely to be an issue, you may also wish to consider if the resource can be moved from one area to another to help maintain essential services.
- When putting local bespoke arrangements into place it is vital that:
- Contract requirements or performance standards are not relaxed to the point where health and safety are put at risk.
- It is made clear that the arrangements are temporary and that matters will return to normal as soon as the Covid-19 emergency is over. Indeed the guidance note makes clear that if assets temporarily close they should be kept in such condition that they can be immediately up and running when this emergency is over. In such instances, likely a basic level of maintenance and security will therefore be required as a minimum.
Employees on any type of employment contract including full-time, part-time, agency, flexible or zero hours and foreign nationals who are eligible to work in the UK on any visa can be furloughed subject to the following excluded categories:
- Anyone who was not employed prior to 30 October 2020
- Anyone for whom you haven’t made a PAYE Real Time Information submission to HMRC between 20 March 2020 and 30 October 2020.
- Employees who are working but on reduced hours or for reduced pay
- Employees currently receiving SSP (see FAQ on SSP and self-isolation below)
- Public sector employees
- Employees of businesses or organisations in receipt of public funding for staff costs (except for those who are not primarily funded by the government and whose staff cannot be redeployed to assist with the Covid-19 response)
This is a concern for many businesses at the moment.
Firstly, the directors need to be mindful of their duties to creditors . Click here for further information on those duties and the measures introduced by the government to help support directors during these difficult times.
There is also a raft of funding and grants as well as commercial finance that might be available to you. Click here for further information or contact us if you would like to discuss further.
If you are coming under increasing creditor pressure, there are other options to explore like the new “moratorium” procedure, which allows viable businesses in financial difficulty to work with an insolvency practitioner to obtain at least 20 business days’ breathing space from creditors to allow the business to formulate a plan to deal with its financial problems.
If you have any concerns about the viability of your business you should speak to your advisors, whether that is your lawyers, accountants or an insolvency practitioner who should be able to help you.