The Energy Crisis and the Hospitality and Leisure Sector

A keep open clause within a lease obliges the tenant to keep their premises open for trading during specific hours. These covenants are most commonly found in retail or hospitality.

As there is a potential for blackouts, this causes an issue for landlords and tenants concerning the keep-open covenants in their commercial leases. It is common for a lease to contain a covenant for the tenant to keep their premises open during trade hours; therefore, any blackout situation may result in a breach of the covenant.

If a tenant breaches the keep-open covenant, then landlords could bring a damages claim against the tenant if they suffer a loss due to the tenant’s failure to trade during the hours specified in the lease, or they could seek to forfeit the lease.

Given the increased costs of keeping businesses open during the energy crisis, tenants may wish to reduce their trading hours. If this is the case, the tenant should communicate this to the landlord to see if they can negotiate a compromise that would work for both parties. Any compromise that is reached can be documented in a Deed of Variation.

During this period of uncertainty and with the rise in the cost of materials, cash flow may be restricted for both landlords and tenants, and therefore there is a risk that properties can fall into disrepair.

Depending upon who is responsible for keeping the property in repair, the landlord or tenant could breach their covenants.

Tenants must know that at the end of the lease, they could have large dilapidations claim against them if they fail to comply with their repairing obligations. On the other hand, landlords may want to consider what remedies they have to ensure the property is repaired during the lease term.

A tenant is often required under the lease to ensure that their property is insured.

A tenant should ensure their property is fully insured during a blackout situation.