What Should Texas Retail Tenants Do if There Is a Snowpocalypse 2022?
The Texas winter storm of 2021 put millions without power and caused more monetary damages than any natural disaster to ever hit the State of Texas. The weather completely shut down the state and displaced countless retail tenants whose storefronts suffered significant damage. This no doubt causes many tenants to consider remedies or relief available to them if their business is shut down this year due to another severe weather event.
For this article’s hypothetical, inclement weather caused a freeze that burst the pipes at a tenant’s retail location. The space is damaged to the point that the tenant cannot operate its business. The rent is extremely expensive and even a month of no revenue could bankrupt the store. The landlord for the retail space is still demanding rent under the lease even though the store is not open at no fault of the tenant. Does the tenant have rent relief considering this storm was clearly an “act of God?”
An “act of God” is an imprecise term that the Texas Pattern Jury charge defines as “[a]n occurrence… caused directly and exclusively by the violence of nature, without human intervention or cause, and could not have been preventable by reasonable foresight.” Texas Pattern Jury Charges – General Negligence and Intentional Personal Torts. In Texas, courts have ruled an “act of God” event like Snowpocalypse will not relieve a party of its obligations under the lease unless the parties expressly provide otherwise by including a “force majeure” provision.
In analyzing whether a force majeure provision provides any relief for a tenant, the first thing that needs to be determined is whether that clause specifically excuses non-payment of rent due to an “act of God.” Most commercial leases do not let tenants off the hook and directly state that an “act of God” does not excuse non-payment of rent. Courts generally enforce rent payment under these clauses because it is assumed that the parties negotiated the risk and that the tenant understood this term when they signed a lease.
For discussion purposes, the hypothetical tenant’s lease does provide rental relief due to an “act of God.” Accordingly, it is now necessary to determine whether this storm constituted an event covered in the lease’s force majeure clause. Force majeure clauses are a creature of contract law and must be based on an agreed provision in the contract. Texas courts generally construe these clauses narrowly and look to see what events are specifically identified as “acts of God” like a state of emergency, government order, fire, or natural disaster.
More than likely, a Snowpocalypse 2022 event would fall under “storms” or “natural disasters” in most catchall force majeure provisions. Before granting relief for an “act of God” in a commercial lease, Texas courts will then look at the event and determine whether it was foreseeable or avoidable.
A Snowpocalypse sequel would not be completely unforeseeable considering the state just experienced such an event last year. However, Texas courts have reasoned that while such an event might perhaps be foreseeable, it occurs with such irregularity that planning for it and allocating the risks associated with such would be difficult absent a force majeure clause. Accordingly, while this major storm may have been foreseeable, the tenant would argue that the destruction it caused was not.
Assuming that a court determines that the extent of the destruction to the retail space was not foreseeable, it will then consider whether it was avoidable. The winter storm might cause the damage without human intervention, but should the client have had the reasonable foresight to take the necessary actions to prevent it? Once the mitigation specialists determined the extent of the damage to the shopping center in the hypothetical, it was clear that dripping the faucets or a similar, reasonable precaution could not have prevented the catastrophic destruction to the store. The tenant therefore may have grounds to seek rent abatement under the force majeure clause.
In the hypothetical, the tenant needs to provide timely notice of the force majeure event. The tenant’s attorney should review the notification requirements under the lease and follow them stringently. Some jurisdictions require timely notice as soon as practicable or will bar the relief provided by an “act of God.” In a best-case scenario, the parties are both reasonable and able to work out a compromise so that no further legal action is required. In the meantime, let us all hope that Snowpocalypse 2021 was the “storm of the century” and no retail tenants or landlords must deal with this type of inconvenience and turmoil in 2022.
Right To Know - November 30, 2022, Vol. 1
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