COVID19 - Is it considered Force Majeure?

Question

I have a few rentals in college towns. As everyone knows, colleges have been closed due to COVID19. I have college tenants who are wanting out of their contract due to counting the Coronavirus as an “act of God” (there is a clause in my contract that contains Force Majeure). He is now unemployed and can’t pay rent (or so he claims). Does the Coronavirus count as an “act of God?”

Would love any advice.

Thanks!

Would love any advice.

Thanks!

Scott Schaper · Answer

Simple answer:  Yes.

As the WHO has declared COVID-19 a pandemic it triggers force majeure.  I would expect anyone in obligations to in a contract to notify the other party of force majeure thereby setting up that negotiations are required to complete the contract.  So I would expect this tenant to be able to use this to leave early, setup a payment plan, etc, as you two decide.  The contract language will be key as it may release the tenant from all responsibilities or only from penalties/fees.

Nik Moushon · Answer

@Matt Hendrickson Soory forgot to tag you in the above post

Nik Moushon · Answer

This is still up in the air for a lot of professions. Not just for rentals. As an architect this is going to come up when a lot of contractors cant meet their contracted due dates. Its really yet to be seen how the country is going to handle this. So there currently is really no YES or NO answer here.....yet.

They have a valid argument since no one could've prevented this or seen it coming but so do you. The gov is about to send out checks to people AND there is already no rent due at this time. So theres the argument that he cant use that clause because there is no way he is violating his contract and you cant kick him out either. Its a bit of a catch 22 at the moment. Its really going to come down to how long this lasts and how quickly things recover. It could be over in two weeks and most contractors could still meet their deadlines with just a bit of help of a couple extra days. Same with schools. If they havent closed for the whole year already they could still be required to finish the semester so where is he going to stay? BUT if this lasts for months before we recover then you will start seeing a lot of companies and individuals using this clause to either get out of contracts or get contract extensions. i.e. If college has already canceled all classes, period, for the rest of the year then  he was have a valid argument to not continue in the contract.

It really is going to be a rough go in the near future to see how the clause is going to get interpreted and to what extent is it going to be allowed to used for just cause. Because there is still construction going on for essential buildings (i.e. hospitals) so they wont get to use this clause flat out for everything but if their supply chain gets disrupted then they would. See...this is going to get VERY messy in the near future. For you though, right now, you need to weigh your losses and how much you want to press them on the contract. Because even if he gets a stimulus payment that doesnt mean he is going to pay you rent because right now you cant evict him. Sorry you are in a tough situation. I would consult a lawyer if you plan on fighting it though.