Can the COVID-19 Crisis Get Your Church out of a Lease?

Written by Raul Rivera on Mar 31, 2020 in Laws and Taxes

There is a provision that many contracts call force majeure. In various cases, this provision may excuse a party from the obligations of a contract due to natural disasters and other unavoidable catastrophes that interrupt the expected course of events and prevent participants from fulfilling obligations.  

The phrase “force majeure” comes from a French term that means “greater force.” It is the concept that a greater force, outside of anyone’s control, occurred that prevents a reasonable person from fulfilling his or her obligation or promise. It has often been referred to as an “Act of God.”  

It is amazing to me that God, who is perfect in all His ways and who gave His only Son to save us all from certain damnation, gets blamed for the bad things that happen in the world. This could get theological really fast, so I will stick to the legal ramifications involving force majeure and COVID-19.

First, it is important to know that in common law, the Latin phrase “pacta sunt servanda” means that “agreements must be kept.” Yet, force majeure provides a way for an individual or corporation to be released from the obligations contained in the contract. Force majeure and pacta sunt servanda are two concepts that have been guiding courts involving cases where force majeure was argued in court. 

In order to know whether COVID-19 can be legitimately used as a reason to be released from a lease or other financial obligation, there are four factors that courts will consider when analyzing a force majeure clause to determine if it applies to a certain instance of non-performance.

  1. The force majeure clause of your contract and the excusing contingencies releasing you must be described with particularity and not in general language.
  2. You will need to show proof that the force majeure event was unforeseeable.
  3. You must show causal link between the force majeure event and the affected party’s failure to perform.
  4. You must prove that you took all reasonable steps to seek to avoid or mitigate the event or its consequences.

Which churches have suffered the most and which have fared better?

Because of the large numbers of churches of all sizes that we serve, we have noticed a pattern in the churches and ministries that have suffered the most compared with those that have thus far fared better during the COVID-19 crisis. 

Churches that have been streaming their services and have made online giving available to their members have fared better. In fact, the finances of churches that use online giving and auto-debit, combined with the live streaming of their services, have suffered little to no decrease. 

Conversely, churches who depend on members writing checks have suffered a 50% to 80% drop in their finances. Many of these churches are now choosing to establish an online presence for their ministry. By doing so, they are able to stay connected with their congregation and community, while also providing online streaming services and receiving donations online.

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Does the lease specifically mention pandemic or disease?

I believe that for some churches that have suffered deep financial losses because of COVID-19, factors two through four are provable or at least provable in part. However, does the lease contract or other agreement have a force majeure clause?  

Now would be a good time to take a look at your church lease contract and read the language. Is there a force majeure clause? It may be titled force majeure, or destruction of premises, or some other title. In essence, it is the clause that describes events that prevent you from performing your (or the landlord’s) obligation. Does it list a set of things like disease, pandemics, or an act of government?  

Remember that in factor one, courts rely on the particularities of the force majeure clause. I have noticed that most lease contracts do not contain such provision and instead contain provisions that pertain to destruction of the physical property caused by storms, public rioting, war, and other events that cause physical damage to the building. That makes the possibility of relying on force majeure to release you from a lease less likely. That is not to say that courts will not rethink the idea of force majeure and interpret it in the new light cast by COVID-19.  

I suspect that some courts may find it reasonable to conclude that a party cannot be held liable—even though the word pandemic or disease is not mentioned in their contract—provided the party of said contract was truly unable to fulfill their obligation directly due to COVID-19 and provided the party meets factors two through four. On the other hand, a landlord may argue that the reason, pandemic or disease, was not mentioned in the contract was because it was purposefully excluded, and to now excuse the party from its obligation would mean that agreements mean nothing.  

One thing to note for sure is that we are in uncharted waters, and force majeure may not be a matter of settled law as once before thought.

What if your church gets a force majeure notice?

One of the things I have noticed in life is that every law comes as a two-edged sword. The same force majeure clause that can be a legitimate claim for a church to get released from the obligations of a lease can also be legitimate for a builder who uses it to get out of a building project for which your church may have put down a sizable payment. 

A builder or contractor could argue that employees got sick with COVID-19, or that the supply chain was disrupted, or that the closure of non-essential businesses prevented him from fulfilling his obligations. 

I have noticed that most building agreements include a very clear and unequivocal description of force majeure, and they usually mention illness. If this happens to your church, it is important to remember who sits on the throne of the church. God is able and completely willing to walk you through this tough time. 

My recommendation is to practice remaining calm and to amicably talk with the builder or contractor in attempts to negotiate a fair settlement that pays him for the actual work performed. You may or may not get everything you believe your church deserves.  If you cannot come to an agreement with the builder or contractor, then perhaps court is where the matter may need to be resolved.

Your hour has come

I know that COVID-19 did not catch the Lord by surprise. This may be the time for your church to shine its brightest and be a blessing in the aftermath.  

Very few will get through this unscathed. People who have lost hope, as well as needy families, need to see the light of Jesus shining through His church.

If you were called to plant a church, don’t stop now. Your hour has come. Use this time while you are home to get set up and organized because the next decade will see a great harvest of souls, the likes of which we have not seen since Azusa Street and The Great Depression.

If you are ready to take your ministry forward or have questions about how to get your church set up online, I encourage you to give us a call at 877-494-4655. Our specialists are standing by to assist you.

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Raul Rivera

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