When state governments mandated closure of retail businesses in March 2020, commercial tenants across the country faced an unprecedented question: does my lease require me to pay rent when the government won't let me open my doors?
Billions of dollars in rent obligations hung on the answer. Landlords and tenants spent 2020–2024 litigating the question in courts across every state. The rulings that emerged are now settled law — a clear map of what clauses work, what doctrines fail, and what language every retail tenant needs in 2026.
This guide synthesizes five years of COVID lease litigation, organized by legal doctrine, with specific guidance on what to negotiate today.
1. Force Majeure: What the Courts Decided
The Core Legal Issue
Force majeure clauses excuse a party's performance when an extraordinary, unforeseeable event beyond their control makes performance impossible or impractical. Pre-2020 commercial lease force majeure clauses were almost universally drafted to protect landlords from construction delays and building delivery failures — not tenants from rent payment obligations.
The litigation question was: does a force majeure clause in a commercial lease excuse a tenant's obligation to pay rent during a government-mandated closure?
The Majority Rule: Tenant Arguments Lost
Courts in New York, California, Illinois, Texas, Georgia, Florida, and most other commercial real estate markets ruled against tenants on force majeure arguments based on three consistent findings:
- Rent payment is a monetary obligation, not a "performance" obligation: Most force majeure clauses expressly carve out monetary obligations. Courts held that paying rent is a payment obligation, not an operational performance obligation, and force majeure typically doesn't excuse payment.
- The lease premises still existed: Force majeure typically requires impossibility — the pandemic closed businesses, but the physical space remained intact and available.
- Most clauses didn't list "pandemic" or "government order" as triggers: Traditional force majeure clauses listed acts of God, war, strikes, and natural disasters. Courts applied the ejusdem generis canon: general catch-all language ("any other cause beyond a party's control") is limited to the same type as the specific examples listed — typically physical disasters, not public health orders.
Result: Rejected by courts in 42+ states. The standard pre-2020 force majeure clause did not excuse rent payment obligations during COVID closures in the vast majority of reported decisions. Gap Inc. v. Ponte Gadea New York LLC (S.D.N.Y. 2021), In re Hitz Restaurant Group (N.D. Ill. 2020), and dozens of others uniformly rejected this theory.
The Exceptions: When Force Majeure Arguments Succeeded
Force majeure arguments did succeed in a narrow set of cases, establishing what language actually matters:
- Explicit "government order" as trigger: Clauses that specifically listed "orders of government," "government regulations," or "government action" as force majeure events — beyond just "acts of God" — were much more likely to succeed. Courts found these provisions unambiguous.
- Explicit inclusion of monetary obligations: Clauses that stated "including the obligation to pay rent" in the force majeure suspension provision won — courts found this language too clear to interpret away.
- Explicit pandemic language: Leases negotiated post-SARS, post-H1N1, or post-Ebola that included "pandemic" or "epidemic" as named events provided the clearest path to relief.
Courts sided with tenants where force majeure clauses (1) explicitly listed "pandemic," "epidemic," or "government order restricting use" as triggering events, AND (2) expressly stated the clause applied to monetary obligations including rent, AND (3) provided proportional rather than all-or-nothing relief.
2. Frustration of Purpose: Courts' Near-Uniform Rejection
The Argument
Frustration of purpose (also called "commercial frustration") is a common law doctrine that excuses contractual performance when an unforeseen event so thoroughly destroys the purpose of the contract that enforcement would be unjust. Retail tenants argued: a retail lease's purpose is retail operation. If the government prohibits retail operation, the contract's purpose is frustrated.
The Courts' Response
Most courts rejected this doctrine in the commercial lease context for two reasons:
Reason 1: The closure was temporary, not permanent. Frustration of purpose typically requires a permanent or near-permanent destruction of purpose, not a temporary interruption. Courts noted that even during closures, tenants could use the space for storage, online order fulfillment, and administrative purposes. 1600 Broadway LLC v. Michael Kors (USA) Inc. (N.Y. Sup. Ct. 2021) held that temporary closure didn't frustrate the lease purpose when the space remained physically usable and the closure was time-limited.
Reason 2: Risk allocation in the lease. Courts repeatedly observed that commercial lease parties are sophisticated parties capable of allocating risks. Force majeure clauses exist precisely to address extraordinary events — and if the parties chose not to include rent abatement in their force majeure clause, courts would not rewrite the parties' bargain through common law doctrine.
Result: Rejected in ~90% of reported cases. The temporary nature of closures and tenants' continuing physical access to the premises defeated frustration arguments in virtually all commercial lease contexts. Only complete permanent closure (which COVID never imposed) would likely succeed under this doctrine.
3. Impossibility and Commercial Impracticability
The Argument
Related to frustration of purpose, these doctrines excuse performance when it becomes objectively impossible or impractical due to unanticipated circumstances. Tenants argued government closure orders made operating a retail business — and thus generating revenue to pay rent — impossible.
Courts' Response: "Difficult Isn't Impossible"
Courts rejected impossibility arguments on similar grounds: rent payment was still physically possible, even if financially painful. The distinction between "impractical" and "more expensive" proved determinative. UMNV 205-207 Newbury LLC v. Caffé Nero Americas Inc. (Mass. Super. Ct. 2020) was a rare outlier granting relief, holding that closure orders made the "use and enjoyment" of the premises truly impossible for the permitted purpose — but most appellate courts rejected this reasoning.
Result: Mostly rejected, with narrow exceptions. A small minority of trial courts found in favor of tenants — primarily in Massachusetts and some California courts — but appellate review reversed or limited most of these wins. The doctrine remains available as a backstop argument but should not be relied upon as a primary lease protection strategy.
4. Co-Tenancy Clauses: The Underrated Winner
What COVID Revealed About Co-Tenancy Provisions
While force majeure and frustration arguments largely failed, co-tenancy clause litigation produced more mixed and tenant-favorable results. Co-tenancy provisions give retail tenants rent reduction or termination rights when specified anchor tenants close or when overall mall/center occupancy falls below a threshold.
How Co-Tenancy Claims Succeeded
When anchor tenants (particularly department stores already struggling pre-COVID — JCPenney, Sears, Neiman Marcus) permanently closed during the pandemic and never reopened, tenants with well-drafted co-tenancy clauses successfully invoked:
- Anchor closure rights: Clauses triggered by anchor stores closing (not just temporarily closing) allowed tenants to reduce rent to percentage-rent only until a replacement anchor opened
- Occupancy threshold rights: When mall occupancy fell below 70–80% and stayed there for the contractual grace period (typically 6–12 months), tenants reduced rent or terminated
- Operating hours correlation: Clauses tying anchor "open and operating" requirements to specific hours provided clear objective triggers unaffected by definitional disputes
Result: Effective when clauses were clear and anchors genuinely closed. Co-tenancy rights were most valuable to mall tenants whose anchor stores permanently closed during COVID. The doctrine was less useful for temporary closures or closures that ended within grace periods. Tenants that successfully enforced co-tenancy rights typically saved 40–60% of annual rent.
5. What Landlords Did (And What Tenants Accepted)
The Deferral Landscape (2020–2021)
Outside of litigation, most COVID lease disputes were resolved through negotiated rent deferrals — structured repayment agreements rather than permanent abatement. The National Council of Real Estate Investment Fiduciaries (NCREIF) estimated that roughly 65% of retail tenants obtained some form of rent relief through negotiation rather than litigation. Typical terms:
- Deferral periods: 2–6 months of rent deferred, typically the spring/summer 2020 closure period
- Repayment terms: 12–36 months of additional payments on top of regular rent
- Abatement (not deferral): Only obtained by tenants with strong negotiating leverage — major national retailers, essential businesses, or tenants with vacant alternative spaces lined up
- Security deposit monetization: Many landlords applied security deposits against unpaid rent in exchange for tenant replenishment commitments
What Landlords Gave vs. What They Fought
| Relief Type | Landlord Willingness | Typical Terms Obtained |
|---|---|---|
| Rent deferral (temporary) | High — most cooperated | 1–4 months deferred, 18–30 month repayment |
| Percentage rent conversion | Moderate — for credit tenants | Base rent → 8–12% of gross sales for 6–12 months |
| Permanent abatement | Low — resisted strongly | Obtained only by tenants threatening closure/vacating |
| Lease restructure/term extension | Moderate — landlords valued tenancy | Added 1–3 years to term in exchange for relief |
| Early termination rights | Low — granted selectively | Buyout clauses, termination fees of 3–6 months rent |
6. What Changed in Post-2020 Leases
Landlord Additions (Watch For These)
Following COVID, many landlords updated their standard lease forms to tighten provisions. Post-2020 landlord-drafted leases often include:
- Explicit pandemic exclusion: "Force majeure events shall not include pandemics, epidemics, or public health emergencies" — directly overriding tenant arguments
- No rent abatement for government orders: Express statement that rent continues regardless of government-mandated closure
- Narrower business interruption coverage: Requirements that tenant's insurance cover pandemic-related business interruption (even where insurers denied such claims)
- Express "no frustration of purpose" waiver: Boilerplate disclaimers of common law doctrines
Tenant Additions (What You Should Demand)
Armed with COVID litigation lessons, sophisticated retail tenants are now negotiating:
- Named pandemic events: "Pandemic, epidemic, or government-declared public health emergency" explicitly listed as force majeure triggering events
- Rent included in force majeure: Express statement that force majeure suspends monetary obligations including base rent
- Proportional relief: Rent reduction proportional to capacity restriction (e.g., 50% capacity order → 50% rent reduction)
- Termination right for extended closure: Right to terminate lease if closure continues beyond 90–180 days (without rent accumulation)
- Business interruption insurance coordination: Specify that force majeure relief is not dependent on insurance recovery
7. The Model Pandemic Force Majeure Rider (2026)
Pandemic and Government Order Provisions. Notwithstanding anything in this Lease to the contrary, in the event of a Pandemic Event (defined as any government-declared pandemic, epidemic, or public health emergency), the following provisions apply:
(a) Complete Closure: If Tenant is required by applicable governmental authority to completely cease operations at the Premises, Base Rent shall be fully abated during the period of required complete closure, not to exceed one hundred eighty (180) days per Pandemic Event ("Maximum Abatement Period").
(b) Partial Capacity Restriction: If Tenant is permitted to operate but at reduced capacity, Base Rent shall be reduced proportionally to the permitted capacity percentage (e.g., 50% permitted capacity = 50% Base Rent obligation).
(c) Termination Right: If a required complete closure extends beyond the Maximum Abatement Period, either party may terminate this Lease upon thirty (30) days' written notice, without penalty to Tenant.
(d) Notice Requirements: Tenant shall provide written notice of a Pandemic Event within ten (10) business days of the applicable government order.
(e) Insurance Coordination: Tenant's rights under this Section shall not be contingent upon recovery under any insurance policy.
8. Co-Tenancy Clause: 2026 Best Practices
COVID confirmed that co-tenancy clauses provide real leverage when properly drafted. 2026 best practices:
Anchor Tenant Definitions
- Specifically name the key anchors (not just generic descriptions like "major department store")
- Define "open and operating" with minimum weekly hours (e.g., 40+ hours/week)
- Specify the remedy triggers whether closure is temporary or permanent
- Include online-dominant retailers as potential replacement anchors (the definition of "anchor" must evolve)
Occupancy Thresholds
- Set occupancy threshold trigger at 80% or higher (not 70% as was common pre-2020)
- Use "open and operating" occupancy, not just "leased" occupancy
- Include grace periods of no more than 6 months (down from 12 months common pre-2020)
- Provide for proportional rent reduction during threshold breach, not just binary on/off
9. Percentage Rent Clauses: Lessons from COVID
Tenants with percentage rent structures (base rent + % of gross sales) had a built-in natural hedge during COVID: when sales collapsed, percentage rent collapsed too. However, most percentage rent structures include a minimum base rent that continues regardless of sales — and that's what tenants struggled with.
Post-COVID, sophisticated retail tenants are pushing for:
- Sales exclusions for pandemic periods: COVID-era sales excluded from natural breakpoint calculations
- Lower base rent with higher percentage rate: Shifts more risk to the landlord; better alignment with actual business performance
- Online sales attribution: Clear rules on whether online sales originating from customers served at the physical location count toward the sales base
10. The 12-Point Post-COVID Retail Lease Checklist
- Force majeure includes pandemic: "Pandemic," "epidemic," and "government-declared public health emergency" explicitly listed as triggering events.
- Force majeure covers rent: Clause expressly states monetary obligations including base rent are suspended during qualifying events.
- Proportional relief: Partial capacity restrictions trigger proportional (not zero) rent reduction.
- Termination right for extended closure: Right to terminate after 90–180 days of government-mandated complete closure, without penalty.
- No pandemic exclusion: Reject any landlord-added language explicitly excluding pandemics from force majeure.
- Co-tenancy anchors named: Specific anchor tenants named (not generic descriptions); "open and operating" defined with minimum hours.
- Co-tenancy grace period ≤6 months: Grace periods shortened from pre-2020 norms; don't accept 12-month cure periods for anchor closures.
- Percentage rent online sales rule: Clear attribution rule for online sales by customers of the physical location.
- Business interruption insurance: Force majeure rights not contingent on insurance recovery; pandemic coverage still widely denied by insurers.
- Insurance exclusion carve-out: Require landlord to maintain property insurance covering pandemic-related physical damage (e.g., HVAC upgrades for air quality).
- Cure period for monetary defaults: Extended cure periods (30+ days rather than 10) for payment defaults arising from force majeure events or financial emergencies.
- Go-dark right: Right to cease operations without triggering lease default, subject to rent continuation obligation — useful for business pivots or temporary market exits.
Frequently Asked Questions
Did force majeure clauses excuse retail rent during COVID? ▾
What is frustration of purpose and did it work for retail tenants? ▾
What force majeure language should retail tenants negotiate in 2026? ▾
Can a retail tenant claim impossibility for COVID closures? ▾
Did co-tenancy clauses help retailers during COVID? ▾
What is a pandemic abatement rider and should I demand one? ▾
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