Does my church need to pay rent when we can’t meet in our building?

By David Powers, an attorney partnering with Auxilio

Most churches around the country have temporarily ceased gathering for services because of the global COVID-19 pandemic. In addition, in many cases church staff are no longer using their offices during the week. The pandemic has raised uncertainty about its impact on commercial leases, and churches that lease property may be considering whether they have an obligation to pay rent during this time. 

The answer? It depends. You should begin by reviewing your church’s lease agreement. 

Force Majeure

Many commercial leases contain a “force majeure” provision which relieves a party from its contractual obligations and allows it to terminate the agreement when unforeseeable circumstances occur beyond the party’s control. These provisions should be analyzed for several items:

Scope

• Force majeure clauses vary greatly and could include generic language excusing a party from performance when events such as “acts of God” or “labor strikes,” and other clauses may be more specific and include a laundry list of force majeure events.

• Some force majeure provisions may include “catch-all” language such as “or any other event of a similar nature that is beyond the party’s control.”

Standard

• Contracts differ as to when a force majeure event excuses performance. For example, some contracts state that a force majeure event must render a party’s performance of its obligations “illegal,” while other contracts use language such as “impossible” or “impracticable.” 

Notice Period

• The contract will generally require a party attempting to exercise the force majeure provision to notify the counterparty within a specific time period. 

Common Law

Even if your church’s lease agreement is silent on excuses for nonperformance, or as an alternative argument to a force majeure provision, your church could potentially be excused from performance under common law concepts of impracticability, impossibility, or frustration of purpose. Your likelihood of success depends on multiple factors, including the jurisdiction in which your church is located as courts have interpreted these common law concepts differently. 

Government Regulations and Status of Pandemic

The status of the government response is rapidly evolving and changing by the hour. The President and many state and local officials have declared states of emergency, and many cities are under “shelter in place” orders (as of last weekend, approximately 20% of the United States population was under such “shelter in place” orders). On March 15, 2020, the Center for Disease Control (CDC) recommended that mass gatherings of more than 50 individuals be postponed or cancelled, and on March 16, 2020, the President recommended that for the next two weeks (at least) Americans avoid social gatherings of more than 10 people. These and other government actions may affect your church’s likelihood of success under a force majeure or common law challenge.

Conclusion 

Whether you must pay rent during the COVID-19 (or may terminate a lease agreement) depends on several factors including, but not limited to, the language in your lease agreement, the jurisdiction in which your church is located, and government restrictions and recommendations.  Even if the force majeure clause is applicable, it may not be in your church’s best interest to formally invoke it, as sometimes you may only invoke it for termination, and not postponement, of your obligations under the lease. It may be prudent to consult with legal counsel before taking any action. 

This material is provided for informational purposes only and not for the purpose of providing legal advice. Should you need assistance, please contact Auxilio, or an attorney if you need legal counsel.