Having deserted units in a retail complex can have negative effects on the other tenants and the landlord. It is therefore common for such leases to contain a ‘keep open’ clause, which provides for the payment of damages to the landlord if a retailer closes a store in breach of its lease.
The Scottish courts recently had to consider such a circumstance. The damages due because a tenant had vacated its premises had been calculated and paid to the landlord. The unit had been closed for several years when the landlord served a schedule of dilapidations on the former tenant, requiring compensation of more than £600,000, in accordance with the dilapidations clause in the lease.
The tenant refused to pay, arguing that payment of damages under the keep open clause meant that its responsibility was limited to keeping the premises wind and watertight.
The court ruled that, in the absence of a clause which acted to cancel the tenant’s liability for dilapidations in the event that the keep open clause was triggered, the tenant was liable for the dilapidations.
“The law will enforce a contract which is not on the face of it unfair. It is important to make sure that the implications of any lease agreement or other contractual arrangement you want to undertake are fully understood before you sign on the dotted line,”. Not all potential pitfalls are clear at the outset. We can help you avoid costly mistakes.