The Pandemic’s Impacts on Developers and Contractors May Call for Seldom-Used Relief: An Overview of the Principles of Force Majeure, Impracticability, and Frustration of Purpose

Whitney Hodges

Whitney Hodges is a partner in Sheppard Mullin Richter & Hampton LLP’s Real Estate, Land Use and Environmental Law practice group. Her practice focuses on advising developers, investors, sellers, and public agencies in land use and environmental law. Whitney’s practice includes obtaining federal, state, and local agency approvals, defending litigation, and securing community and political support for complex development projects, including renewable energy facilities, urban infill, master planned communities, and other mixed-use, retail, industrial, and commercial projects. She is based out of the firm’s San Diego office.*

As society responds to the COVID-19 pandemic, states and local governments across the United States, including the State of California, issued shelter-in place ("SIP") orders¹ to prevent its spread. While intended to benefit Americans in the long run, these actions have resulted in massive and largely unprecedented disruptions in the economy, including record levels of unemployment and sharply limiting the ability of businesses to provide, and customers to purchase, goods and services.² The effects of the pandemic are wide spread and have created financial hardships for individuals and families in every state and locality, as well as inexplicable shortages of toilet paper.³

While the principal focus in the battle against COVID-19 remains on limiting the human impact and global efforts to slow its spread, it is impossible to ignore the scale of the economic impact of the virus. Like almost every other aspect of life, real estate interests and land development have not been spared from the wrath of COVID-19. Many local governments in California have implemented residential and commercial tenant protection and eviction moratoria during the pendency of the pandemic.⁴ With varying criteria, these orders generally grant temporary respite from evictions for qualifying commercial and residential tenants due to nonpayment of rent arising out of substantial decrease in income or substantial out-of-pocket medical expenses resulting from COVID-19.⁵ The orders do not exempt tenants from ultimately tendering past due rent, but, instead grant said tenants an extension to respond to unlawful detainer complaints and submit payment.⁶