If you own commercial property, finding a long-term tenant is only part of the equation. You also must be certain your tenant continues to pay rent for the duration of the lease. If your tenant stops paying, the company’s representatives may claim impossibility of performance.
Under an impossibility of performance theory, a commercial tenant argues it is impossible or impracticable to continue to pay rent or otherwise comply with the terms of the agreement. In the Lone Star State, two types of impossibility of performance are possible: subjective and objective.
In a commercial lease context, subjective impossibility may mean the tenant is not able to pay rent. For example, the tenant may have gone through a corporate restructure or bankruptcy that left the company with insufficient funds to cover lease-related expenses.
This insolvency applies only to the tenant and not the public at-large. While there are certainly exceptions, commercial tenants typically cannot wiggle out of a lease because of subjective impossibility.
Objective impossibility means something outside the tenant’s control makes fulfilling the contract impracticable or impossible.
For example, the tenant may have rented your commercial property to do business, but an eminent domain action requires the tenant to vacate. Both continuing to do business in your commercial space and paying rent may be objectively impossible for your tenant. The same is also likely true for other tenants you may find.
While your tenant’s ability to avoid performance due to an objective impossibility theory depends on the language of the agreement and other facts, your tenant probably has a better argument with objective impossibility than with its subjective counterpart.