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Law360 (September 18, 2020, 4:09 PM EDT) —
In this edition of Coronavirus Q&A, Nixon Peabody‘s real estate leader discusses the way force majeure is being used in leasing and construction contexts and notes that affordable housing development has remained strong throughout the pandemic.
Denise Pursley, the New York-based leader of Nixon Peabody LLP’s real estate practice group, handles a wide range of real estate finance, development and transactional matters, and also works on various land-use and environmental matters.
Pursley shared her thoughts as part of a series of interviews Law360 is doing with attorneys to discuss the ways the COVID-19 pandemic has created new legal questions and impacted businesses.
This interview has been edited for length and clarity.
What are some of the key questions that your real estate clients are coming to you with at the moment?
Well the answer to that depends, I guess, on the client and the asset that we’re talking about. I fortunately have the benefit of speaking with my colleagues in a lot of different markets across the country, and we see different things in different markets, of course, but there are commonalities. So for example, in commercial leasing, as you know very well, there are questions around rent deferrals, and rent abatement and early termination of leases.
There are also questions around enforceability. Enforceability of force majeure clauses as well as any other clause in the lease that might allow a tenant to recall payment of rent. And so we went through those questions early on in the pandemic. Primarily March, April, into June. Those were many of the questions that we were getting and dealing with.
Of course on the residential side, the questions really had to do with enforceability of leases. There were many and still are eviction moratoriums, as you know. The CDC just came out with another moratorium on evictions, and so we’ve been guiding clients through those questions on enforceability of residential leases in particular.
I’m curious to hear your thoughts on force majeure. Of course everyone started talking about it in the legal community in March and April and there’s still a lot of talk about it, but maybe we’ve learned more over the past few months about how force majeure is applying in some of these conflicts. What do you think we’ve learned about force majeure and what are your thoughts on how it’s being applied?
Well, what we’ve learned about force majeure is that it’s not a remedy that’s readily available in most instances to allow a tenant to stop payment of rent. Force majeure provisions were generally put into leases to benefit the landlord. Not necessarily tenant. And as you know, most force majeure provisions do not allow for — or are not an excuse for — non-payment of rent. Of course, that hasn’t stopped tenants from asserting arguments. Pre-litigation arguments in particular. They’ve also asserted, in addition to force majeure, common law principles of impracticability and impossibility, as well as frustration of purpose.
Those are winding their way through the courts, but I could tell you just recently … there was a New York Supreme Court case, which, while not directly dealing with the issue,…