Understanding Force Majeure Clauses in Commercial Property Leases

What Force Majeure Means in a Commercial Lease Context

The phrase "force majeure" derives from French and translates broadly as "superior force." In a commercial lease, it refers to events that are:

• Beyond the reasonable control of either party.
• Unforeseeable at the time the lease was signed.
• Of a nature that makes performance of the lease impossible, not merely more difficult or expensive.

Standard qualifying events listed in Indian commercial leases include: pandemics and epidemics, natural disasters (earthquake, flood, fire not caused by negligence), war or civil unrest, government orders or legislative changes, and national strikes. The specific list matters — a broadly drafted clause can sweep in events that are foreseeable or manageable.

What Force Majeure Clauses Typically Allow (and Don't Allow)

There is a spectrum in how force majeure clauses are drafted. The consequences range from minor to severe depending on the specific language:

Most institutional lease agreements — particularly those used by banks and large retail brands — tend toward narrow definitions because these tenants have standardised legal templates vetted over many lease cycles. However, newer or smaller tenants may attempt to negotiate broader force majeure provisions.

How Indian Courts Treated Force Majeure During COVID-19

The COVID-19 pandemic stress-tested force majeure clauses across India's commercial property market. Several key observations from that period are instructive for today's investors:

• Courts generally upheld rent obligations for office tenants on the grounds that businesses could continue operating remotely. The pandemic did not render office lease performance "impossible" — merely inconvenient.
• Retail tenants received more sympathy from courts and arbitrators, particularly for the period of compulsory closure under government orders. Some mall landlords and retail tenants negotiated consent awards for partial abatement during lockdown months.
• Institutional tenants (banks) largely continued paying rent throughout the pandemic. Bank branches remained classified as essential services and were permitted to operate even during strict lockdowns — making force majeure invocation difficult for bank tenants.
• The Supreme Court of India, in Energy Watchdog v. CERC (2017), had already established that force majeure under Indian contract law must show that performance has become literally impossible, not just commercially impractical. This standard was applied in COVID-era commercial lease disputes.

What a Well-Drafted Force Majeure Clause Should Include

As an investor reviewing a lease before acquisition, or negotiating a new lease with a tenant, these are the provisions you should look for or insist upon:

1. Narrow definition of qualifying events: List specific, genuine catastrophic scenarios. Avoid catch-all language like "any event beyond reasonable control."
2. Written notice requirement: The tenant must notify you in writing within 5–10 business days of claiming a force majeure event. Failure to notify should void the entitlement to abatement.
3. Capped abatement period: Specify a maximum period of rent suspension — typically 60 to 90 days. After this period, rent obligations resume regardless of whether the force majeure event has fully ended.
4. No unilateral termination right: The clause should not give the tenant the right to terminate the lease simply because a force majeure event has persisted. Termination should require mutual agreement or a prolonged period (e.g., 180+ days of total impossibility).
5. Automatic reinstatement: When the force majeure event ends (or the cap period expires), rent obligations automatically reinstate without requiring a fresh notice or agreement.
6. No abatement for partial impossibility: If the tenant can use part of the premises, abatement should be proportional — not a blanket suspension of the full rent.

Red Flags in Force Majeure Clauses

When reviewing a lease agreement on a property you are considering for acquisition, watch for these warning signs:

How Bank Leases Handle Force Majeure

For investors in bank-leased commercial properties with institutional-grade leases in Delhi NCR, force majeure clauses tend to be more investor-friendly for a structural reason: banks negotiate from standardised lease templates approved by their legal departments, and these templates have been refined across thousands of branch leases over decades.

Bank lease force majeure clauses typically include: narrow event definitions (limited to genuine catastrophes), short abatement periods (30–60 days maximum), no termination rights, and strict notice requirements. Additionally, as noted above, bank branches were classified as essential services during COVID-19 — meaning even the most broadly drafted force majeure clause was difficult for a bank to invoke in good faith during that period.

This is one of several structural reasons why pre-leased commercial investment in Delhi NCR anchored by bank tenants is considered lower-risk relative to other tenant categories.