Should a landlord modify the Use Clause during the Coronavirus Pandemic

Peter Morris and I, Howard F. Kline, Esq. discuss a number of commercial lease issues, including whether or not a landlord should modify a tenant's use clause during the Coronavirus pandemic.

USE CLAUSE

The example that we talk about is a real life situation in which a Canadian restaurant chain, unable to seat patrons in their restaurants have resorted to online orders for grocery deliveries. In their case, the chain is not only doing online delivery and curbside pick-up of prepared meals, but sales of the ingredients that they purchase wholesale from their normal vendors.

We discuss typical USE clauses that we see in restaurant leases.

Peter often writes restaurant use clauses that might limit the type of cuisine. Representing the landlord, he "always tries to add the menu", whether it will offer sit-down service and depending upon the operation, take-out and delivery. Peter states that he never contemplated that it would be selling it's ingredient items.

Our approach during the conversation was that a landlord should be flexible and allow its tenants to be equally creative and flexible, so long as the landlord is not allowing the tenant to, (1) cause damage to the property or the premises, (2) violate any law, or (3) violate a provision of a lease of another tenant on the property. Most of our discussion relates to #3 in which we discuss how a modification of a tenant's use clause may cause a violation of another tenant's "exclusive rights".

A discussion takes into consideration how a restaurant in a grocery anchored shopping center might violate the grocery anchor's lease that likely includes a provision that says that the landlord will not lease to or permit the sale of grocery items in the center.

EMINENT DOMAIN

We also discuss Eminent Domain Clauses that, not only might be triggered in the event of a government ordered shutdown of the tenant's business due to the Coronavirus but the consequences of an Eminent Domain Clause that "requires" the termination of the lease in the event of eminent domain.

LANDLORD NOTICE OF FORCE MAJUERE

Finally, we debate why a landlord would send a Notice of Force Majuere and the benefits and possible negative consequences of such notice.

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