Some of our stores have a ‘keep-open clause’. What is the purpose of this clause in a tenant’s lease?

A ‘keep-open clause’ is the name commonly given to the obligation seen in leases requiring a tenant to trade continuously from the premises throughout the term. The purpose is to keep all of a shopping centre’s units occupied and open for business to maintain the centre’s profile and investment value.

Paul Wallace, associate in the retail property team at law firm Brodies, says tenants should be mindful of how Scotland deals with these clauses. He explains: “Where a tenant under a lease containing a keep-open clause in England wants to stop trading and move out of the unit, they can generally do so - unless they are an anchor tenant. English law takes the view that damages are an adequate remedy for breach of contract (including breach of a lease), and landlords can find it difficult to substantiate a capital loss unless it is an anchor tenant.”

He continues: “In Scotland, landlords are able to enforce a keep-open clause by obtaining an order for specific implement, obliging the tenant to continue trading. In the most significant Scottish case in recent years, the court was asked by the tenant to follow the principle set out in England. However, despite the case being almost identical to the leading English case, the court took the opposite view and said that, save in exceptional circumstances, the landlord is entitled to require the tenant to comply with its obligation in the lease to trade.”

He adds that in Scotland, the landlord can also seek an interdict to prevent the tenant closing if they think this is likely.