Early termination of lease agreement

A reader acquired a restaurant under a title of lease for five years. During the period of lease the Reader incurred a considerable amount of expenses in refurbishing and redecorating the premises.

Since Reader was not rendering enough income from the restaurant, he decided to terminate the lease before the lapse of the first five years. According to the lease agreement, a notice period had to be given to the landlord before the termination of the lease.

Reader suggested to the landlord to have the lease terminated immediately and be compensated for the loss of rent which would have accrued during the notice period by retaining all the improvements that the Reader had effected in the leased premises.

The landlord refused, and evicted the tenant immediately and is now demanding rent due for the notice period which the tenant should have paid according to the lease agreement. The Reader is refusing to pay the rent for the notice period and is now demanding restitution of his belongings or at most the reimbursement of the expenses incurred in the leased premises.

What is the position at law?

Once the lease agreement provided for a notice period, then the Reader was obliged to honour his contractual obligations. If the landlord elects to institute civil proceedings for the rent which is due for the notice period, in all probability the Reader would be forced to pay.

With regard to the expenses and improvements made, much depends on the terms and conditions of the lease agreement. If the lease agreement specifically provided that all improvements were to be retained by the landlord at the termination of the lease without any duty to reimburse the lessee for such improvements, then, the Reader does not really stand a good chance to demand reimbursement.

If, on the other hand, the lease agreement is silent on this issue, then the provisions of the law would apply.

One should also consider the type of improvements that were made by Reader to the leased premises. If these improvements could easily be removed from the premises, then the Reader may request that they be returned to him, particularly if he needs them for himself.

However, it is at the option of the landlord to decide whether or not he intends to keep these improvements and reimburse the Reader for them. If the Reader does, in fact, remove these improvements, he is obliged to restore the premises to the condition in which they were before the improvements were made.

According to section 1564(2) of the Civil Code, it is not enough for the Reader to state that he needs these improvements for himself, but he must show that he can obtain some profit by taking them away, and provided that the lessor does not elect to keep them and pay to the lessee a sum equal to the profit which, by taking them away, the latter would obtain.

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