The use of the legal concept of the lease is an essential tool for most businesses in Mexico, where the fulfillment of their obligations, especially the payment of rent, may be limited or affected these days by the various current and future government measures issued by our authorities in relation to the health contingency derived from COVID-19. This situation will affect both lessees, since they can be prohibited or limited in the use of the leased property, and lessors, whose income may be affected by the possibility that their lessees excuse themselves from paying rent in the case of fortuitous events or force majeure.
Under Mexican law, it is possible to excuse liability when the breach of an obligation is the consequence of an event considered force majeure. The foregoing is relevant, since currently, various companies established in Mexico have been in need of closing their operations, either as a voluntary preventive measure or due to an order of an authority, to prevent the spread of COVID-19. This will undoubtedly generate an economic impact by suspending operations. Additionally, their contractual obligations like the payment of rent would subsist. Thus, one of the challenges derived from the spread of COVID-19, will be the determination of existence of force majeure events to invoke total or partial exclusion of liability in the fulfillment of obligations.
Civil legislation in Mexico provides, as a general rule, that when due to an event of force majeure the lessee is totally prevented from using the property in question, no rent will be incurred while the impediment lasts. It also provides that, if said impediment lasts more than two months, it is feasible to request the termination of the contract. In addition, in cases where the use of the thing is only partially prevented, the lessee or the lessor may request the reduction of the rent, unless the termination of the contract is chosen, if more than 2 months have elapsed since the origination the impediment. It is worth mentioning that, in order to corroborate the applicability of the previous provisions to each specific case, it must comply with the state civil legislation that regulates each lease agreement.
To date, various authorities at the municipal, state and national levels have issued provisions that prohibit the holding of massive events, as well as the total or partial operation of various commercial premises. It is necessary to attend to these provisions, to determine their legality and enforceability, to determine whether they have the consequence of justifying the existence of a fortuitous event or force majeure that is considered as a total or partial impediment to the use of the leased property, and thus assert any exclusion of liability in the payment of rent, request its decrease or request the termination of the lease.
On the other hand, the General Health Council published in the Official Gazette of the Federation on March 23, 2020, an agreement derived from an Extraordinary Session of said council held on March 19, 2020. Through such agreement, the council determined, among others things, to recognize the epidemic of disease by the COVID-19 in Mexico, as a serious disease of priority attention; at the same time, agreed generally to sanction the necessary measures for the prevention and control of the COVID-19 epidemic, in consensus with the agencies and entities involved in its application.
Thus, it will be a matter of analysis that the previous provision by itself, or concatenated with those issued by the various authorities, configure a total or partial impediment to the use of the real estate object of lease. This to determine if it is feasible to enforce the exemption in the payment of the rent caused, the decrease in the rent or the termination of a lease. However, the Ministry of Health, which is constitutionally empowered to dictate the essential measures to prevent and combat damage to health and decree the suspension of work or services, to date has omitted to issue a resolution that definitively supports the suspension of all commercial operations.