Tenants looking at leasing retail premises may be shocked to find a clause in their lease requiring them to keep their business open at certain times of day and/ or for a set number of days in the week. Many Landlords include these clauses (called “keep open clauses”) to ensure that their building is open and busy.   At a time where e-commerce and online sales are increasing, while physical sales and high street footfall are in steady decline, keep open clauses may be considered a useful tool for Landlords to prevent Tenants from closing their stores indefinitely.

What is a ‘Keep Open’ Clause?

A keep open clause prescribes specific times that the Tenant is required to keep their premises open for business. Depending on the wording of the clause, the Landlord might specify particular hours that the premises must be open for or set out particular days that they must be open for (such as Monday to Saturday and shorter hours on Sundays and public holidays).

Why do Landlord’s Use Keep Open Clauses

Landlords often include keep open clauses in “turnover leases” (leases that entitle the Landlord to a share of the Tenant’s turnover). The reasoning is simple – the more the tenant keeps open for business, the higher the turnover is likely to be.

Keep open clauses may also be used to regulate the opening hours in large retail complexes, as they ensure that the units remain active and busy during certain times, thus attracting higher footfall.

Landlord’s may also favour keep open clauses for added security over the leased premises. Keep open clauses may deter antisocial behaviour and reduce instances of vandalism and criminal damage to the premises since they force the property to be open for, perhaps, longer than the Tenant would ordinarily want to trade.

Enforceability and Remedies

Despite the benefits for Landlords, keep open clauses are, in practice, quite hard to enforce.  If a Tenant is found to be in breach of a keep open clause, Landlord may seek three potential remedies – injunctive relief, damages or forfeiture of the Lease arising from a breach of covenant.

Injunction:  Landlords can seek an injunction from the Court to enforce the keep open clause, but the House of Lords decided in 1997 that injunctions would almost always not be given, since to do so would require constant supervision of the keep open clause by the Court, which  would  be undesirable.

Damages: The Landlord can seek to recover financial loss arising from the tenant’s failure to keep the premises open. The Tenants failure to comply with the keep open clause may impact the Landlord’s rental income where the Tenant has a turnover rent contract, although the Landlord may have difficulty identifying exactly how much it has lost because of Tenant’s failure to comply.

Forfeiture: If the Landlord wishes, it can forfeit a lease for breach of covenant by the Tenant, although it may be that, in a falling market, the Landlord will have difficulty reletting any forfeited premises.  In addition, a Tenant will usually have the right to apply to the court for relief from forfeiture, so the Court could overturn the Landlord’s forfeiture.

Conclusion

For the reasons stated above, a keep open clause might be considered a useful tool in a Landlord’s tool kit, although in practice the Landlord might have difficulty enforcing a breach of a keep open clause.  A Tenant, faced with a keep open clause may object to the imposition of such a burdensome obligation – a concern that should be raised and satisfied at the Heads of Terms stage on any new letting.

How Gordons Partnership can help

If you require advice about your commercial lease, whether you are a Landlord or Tenant, a member of our experienced team are on hand to offer friendly and professional advice.

If you would like to contact us to discuss your matter, please call 01483 451 900 or email sols@gordonsols.co.uk and a member of our team will be in contact.

 

About the Author

Grace

Grace​​​​ Newlands

Trainee Solicitor