Which clause is recommended to be included in lease agreements to protect the lessor's payment obligations?

Which clause is recommended to be included in lease agreements to protect the lessor's payment obligations?

• A. Force majeure clause
• B. Hell or high water clause
• C. Non-compete clause
• D. Limitation of liability clause

Answer: (B)

Protecting the lessor’s payment stream relies on a provision that keeps rent due regardless of what happens. A hell or high water clause requires the lessee to continue making all scheduled payments under the lease in every circumstance, so long as the lease stays in effect. This ensures cash flow for the lessor even if the asset is damaged, becomes unusable, or business conditions change. Force majeure can excuse performance for a period when events beyond anyone’s control occur, which could pause payments; non-compete and limitation of liability addresses competition or damages, not ongoing rent obligations. So the clause that best safeguards ongoing payments is the hell or high water clause.

Protecting the lessor’s payment stream relies on a provision that keeps rent due regardless of what happens. A hell or high water clause requires the lessee to continue making all scheduled payments under the lease in every circumstance, so long as the lease stays in effect. This ensures cash flow for the lessor even if the asset is damaged, becomes unusable, or business conditions change.

Force majeure can excuse performance for a period when events beyond anyone’s control occur, which could pause payments; non-compete and limitation of liability addresses competition or damages, not ongoing rent obligations. So the clause that best safeguards ongoing payments is the hell or high water clause.