Therefore, the Court of Justice must consider whether a compensation clause is a punitive clause or a valid liquidation clause. This is the construction that must be decided on the intrinsic terms and circumstances of a specific contract tried at the time of the performance of the contract, not at the time of the breach. The test is objective, and the duty to show that the determination of compensation was a penalty is up to the party that is being sued against it. The tenant`s rights. The tenant`s rights are defined as more general. With a tenancy agreement, the tenant negotiates the right to use the premises, while the lessor negotiates the rental income. It is more difficult to predict how the landlord may be insolvent and how the tenant affects the use of the premises. For this reason, most clauses generally consider it to best protect the client`s rights. If you need advice or assistance in selling or purchasing rental properties, please contact one of our 5 experienced residential conveyancing teams. Limit the damage. An important aspect of this clause is the obligation for both parties to try to minimize the damage caused by a delay.

Both the tenant and the landlord must do all they can to fulfill their obligations in the tenancy agreement. This helps to ensure that disputes are not uncontrollable. In the lessor`s appeal to the Court of Appeal, the lessor argued that the compensation clause was a penalty, as the very purpose of the compensation clause is not to compensate the infringements, but to frighten the owner and prevent the owner from breaking the contract. The lessor may only allow the lease to expire if the lease contains an explicit diversion clause and for residential residential property, an owner must take the matter to court. The rights of the owner. Most default and remediation clauses focus on the owner`s rights. Here, it sets out concretely the events that constitute a default of the tenant and also outlines what the landlord can do to remedy the failure. This is the case because if the tenant fails, the lessor then has an asset that is not profitable. By listing the most common defaults and leaving a general standard provision, this clause best protects the owner`s right to earn money through ownership on the premises.