This clause in real estate contracts (leases, purchase agreements, event venue rentals) determines what happens to payment and performance obligations when force majeure events prevent use of the property. For example, if a venue is damaged by a hurricane and an event must be cancelled, does the renter still owe the full rental fee? If a building is condemned due to environmental contamination discovered after signing, can the buyer walk away? If a tenant cannot access leased space due to government lockdown, must rent still be paid? Real estate force majeure clauses are particularly complex because the property itself may be damaged, access may be restricted by government order, or the property's intended use may become impossible—situations that go beyond mere performance difficulty. The clause must address whether obligations are suspended (temporarily excused) or terminated (permanently ended), and how costs are allocated between parties.
Real estate presents unique challenges because property is immobile and often irreplaceable. Unlike a service that can be delivered elsewhere or a construction project that can restart, a damaged venue or inaccessible building may have no workaround. Additionally, real estate contracts often involve third-party interests (lenders, insurers, government authorities) that complicate force majeure relief. Courts are split on whether pandemics excuse rent payment—some view it as a shared risk of property ownership, others view it as a temporary suspension. Insurance coverage also matters: if the property owner's insurance covers the force majeure event, should the tenant still pay rent?
Clearly specify whether force majeure suspends or terminates the contract, and under what conditions. For leases, state that rent abatement (suspension) applies only if the tenant cannot access or use the space due to force majeure, and specify the percentage of rent abated (often 100% for total loss of access, prorated for partial access). For purchase agreements, include a termination right if force majeure damages the property beyond a threshold (e.g., 25% of value) before closing, allowing the buyer to exit without penalty. Require the property owner to maintain insurance and specify how insurance proceeds affect payment obligations—typically, if insurance covers the loss, the tenant still pays rent. Include a timeline: if force majeure prevents use for more than 180 days, either party can terminate. For event venues, specify that cancellation due to force majeure triggers a credit toward a future event rather than a full refund, protecting the venue's cash flow while offering the renter flexibility.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause in real estate contracts (leases, purchase agreements, event venue rentals) determines what happens to payment and performance obligations when force majeure events prevent use of the property. For example, if a venue is damaged by a hurricane and an event must be cancelled, does the renter still owe the full rental fee?
Why should I care about this clause?
If a building is condemned due to environmental contamination discovered after signing, can the buyer walk away? If a tenant cannot access leased space due to government lockdown, must rent still be paid?
What are my options?
Real estate force majeure clauses are particularly complex because the property itself may be damaged, access may be restricted by government order, or the property's intended use may become impossible—situations that go beyond mere performance difficulty. The clause must address whether obligations are suspended (temporarily excused) or terminated (permanently ended), and how costs are allocated between parties.
How does this affect small businesses?
Real estate presents unique challenges because property is immobile and often irreplaceable. Unlike a service that can be delivered elsewhere or a construction project that can restart, a damaged venue or inaccessible building may have no workaround.