Illinois Bankruptcy Court Finds that Governmental Shutdown Order Triggered Force Majeure Clause for Restaurant Tenant

Many commercial real estate leases include a “force majeure” clause that covers events or circumstances beyond a party's control, such as fire; earthquake; war; or an act, omission, or delay of a governmental authority. If such an event or circumstance were to prevent a party from performing and was covered by a force majeure clause, the failure to perform might not be considered a default.

Recently, the U.S. Bankruptcy Court for the Northern District of Illinois held that a lease’s force majeure clause partially excused a restaurant tenant from its rental obligations because of the COVID-19 governmental shutdowns. In re Hitz Restaurant Group, 616 B.R. 374, 2020 WL 2924523 (Bankr. N.D. Ill. 2020). The force majeure clause at issue provided that any obligations that are prevented or delayed due to governmental action or order would be excused. The tenant argued that Illinois Governor J. B. Pritzker’s executive order prohibiting on-site consumption of food and beverages at Illinois restaurants excused its failure to pay rent from March through June 2020.

However, the Court noted that under Illinois law, a force majeure clause excuses contractual performance only if the triggering event “proximately causes” a party’s nonperformance. Because the Governor's order still permitted carry-out, curbside pick-up, and delivery from the restaurant premises, the Court reasoned that the Governor’s order only partially excused the tenant’s failure to pay rent. The Court therefore held that the tenant remained responsible for 25% of the rental payments, including additional rent obligations like real estate taxes and common area maintenance charges, for the months of April through June. This percentage constituted the portion of the restaurant premises (i.e., the kitchen) that was still useable for the permissible services. For the month of March, the Court found the tenant liable for the entire rent because that rental obligation became due on March 1, prior to the start of the shutdown order.

In contrast, in a recent Florida case, In re Seven Stars on the Hudson Corp., No. 19-17544-SMG, 2020 WL 4558344 at n.82 (Bankr. S.D. Fla. Aug. 7, 2020), the Court noted that because the force majeure clause in the lease expressly stated that a force majeure event did not excuse rent payments, rent was not excused notwithstanding the local governmental order completely shut down the tenant’s trampoline park business.

These cases show that tenants and landlords need to be aware of the language in their commercial leases and the potential effects on their rights. Attorneys at Lewis Rice have extensive experience negotiating, drafting, and enforcing commercial leases. Please reach out to a member of the Lewis Rice Real Estate Practice Group should you need any assistance.

Firm Highlights
Client Alert

The Changing Workplace Following the Latest CDC Mask Guidance

More
Client Alert

Supreme Court Hands Down Unanimous Decision Limiting FTC’s Ability to Seek Monetary Relief

More
Client Alert

Missouri Supreme Court Holds that Public Governmental Bodies May Not Charge for Attorney Review Time

More
News

Jeannine Moentmann Becomes President of St. Louis Paralegal Association for 2021-2022

More
News

Michael D. Mulligan, Mysun Charitable Foundation Recognized at Greensfelder Park Ribbon Cutting Ceremony

More
News

Claims Filed for Compensation in North Carolina Ecusta Trail Rail-to-Trail Case

More
News

Jeremy P. Brummond Presents at Webinar for Experienced Construction Attorneys

More
Client Alert

EEOC Issues Updated Guidance on COVID Vaccination Policies

More
Client Alert

CROWN Act Legislation on the Verge of Passage in St. Louis City & County

More
Client Alert

The New Standard Contractual Clauses: Scope, Impact, and Next Steps

More
Client Alert

Missouri Supreme Court Reverses Overtime Wages Judgment Resulting from Employer-Mandated Screenings Under the Portal-to-Portal Act

More
Client Alert

DOL Publishes Cybersecurity Guidance for Benefits Plans

More
News

A Lawyer’s Guide to the Galaxy Podcast Named Among Best Copyright Law Podcasts for 2021 by Welp Magazine

More
Diversity & Inclusion

Lewis Rice Launches “Next Level” Diversity and Inclusion Programs

More
Client Alert

Colorado Joins the Bandwagon, Enacts Comprehensive Privacy Law

More
Diversity & Inclusion

Law Firm ILN-telligence Podcast Hosts Ronald A. Norwood to Discuss Mentorship, Diversity & Inclusion in the Legal Industry, and the Importance of Equity for All

More
Client Alert

Supreme Court Limits Ability to Compel Access to Private Property Without Compensation

More
Client Alert

First-Issued Interim Final Rule Gives Guidance on No Surprises Act

More
Client Alert

FTC Adds Teeth to the ‘Made in USA’ Rule

More
News

Lewis Rice Welcomes 2021 Summer Associates

More