Compensation for loss of rent in terminated lease agreement

A Reader acquired an aparthotel under a title of lease for three years, renewable, at the lessee's option, for a further three years. During the period of the lease Reader incurred a considerable amount of expenses in refurbishing and redecorating the aparthotel.

Since Reader was not deriving enough income from the establishment, he decided to terminate the lease before the lapse of the first three years. However, according to the lease agreement, a notice period had to be given to the landlord before terminating the lease.

Instead of paying rent for the notice period, Reader suggested to the landlord to have the lease terminated immediately and be compensated for the loss of rent which would have accrued during that period by retaining 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. Reader is refusing to pay the rent for the notice period and demands restitution of his belongings or at most the reimbursement of the expenses incurred.

What is the position at law?

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

With regard to the expenses and improvements made in the aparthotel, again 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 Reader stands a good chance to demand reimbursement.

One should also consider the type of improvements that were made by the Reader in the leased premises. If these improvements could easily be removed from the premises, than 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 the improvements and reimburse Reader for them. If Reader does, in fact, remove the improvements, he is obliged to restore the thing to the condition in which it was before they were made.

According to section 1564(2) of the Civil Code, it is not enough for Reader to state that he needs the 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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