Keep Open Covenants

A keep open covenant requires a tenant to actively trade for the duration of its lease, but what is the landlord’s remedy if the tenant ceases to trade? In other words, do keep open covenants really work?

Keep open obligations are most commonly seen in anchor tenant leases or those leases where the rent is calculated according to the tenant’s turnover. These clauses are not popular with tenants. They argue that they should not be forced to trade when they do not want to do so, whereas landlords maintain that tenants should adhere to their leases.

The established case law is that only in the most exceptional cases will keep open covenants be enforced by specific performance. Instead, the more usual approach is to refuse specific performance and compensate the landlord in damages. A recent Scottish decision has also reversed Scottish case law and broadly followed the English position.