Compensation for Early Termination of a Business Premises Lease at the Tenant's Request

Analysis of Supreme Court Ruling No. 1469/2025, of 21 October, and its differences with Supreme Court Ruling No. 74/2018, of 14 February

Summary

The early termination of a business premises lease contract at the unilateral initiative of the tenant, in the absence of an express agreement, raises significant problems regarding the nature and scope of contractual liability. The recent Supreme Court Ruling No. 1469/2025, of October 21, introduces a restrictive criterion for quantifying compensation, redirecting the landlord's claim to the realm of actual damages caused, and rejecting the automatic enforceability of all future rents. This work analyzes said ruling and contrasts it with the provisions of Supreme Court Ruling No. 74/2018, of February 14, concerning the validity and enforceability of penalty clauses agreed between business entities, delimiting the decisive role of the contractual content in the applicable compensation regime.

I. Introduction

The early termination of a business premises lease contract by the unilateral will of the tenant, when there is no express agreement authorizing it, has been the subject of significant jurisprudential evolution in recent years. The central question revolves around whether such conduct entitles the landlord to demand the entirety of the pending rents until the agreed term ends or whether, on the contrary, it must be limited to compensation for the damages actually suffered.

Supreme Court Ruling No. 1469/2025, of October 21, represents a turning point by introducing criteria of proportionality and actual damage in cases lacking specific contractual provision. Its comparison with Supreme Court Ruling No. 74/2018, of February 14, allows for a clear outline of the High Court's current doctrine on the matter.

II. Supreme Court Ruling No. 1469/2025, of October 21

1. Facts of the Case

The dispute originated from a business premises lease contract with an agreed duration of eight years, which did not grant the tenant a unilateral right of withdrawal. Before the term's expiration, the tenant communicated their decision to terminate the contract via certified mail (burofax), handed over the keys, and vacated the property.

The landlord filed a lawsuit demanding payment of all pending rents until the contract's end, characterizing their claim as performance by equivalent. Both the Court of First Instance and the Provincial Court upheld the claim.

2. Reclassification of the Claim and Legal Consequences

The Supreme Court rejects the classification upheld by the lower courts and understands that the landlord's claim cannot be subsumed under performance by equivalent, but rather falls under contractual termination with compensation for damages.

This reclassification is decisive, as it shifts the axis of the debate from the automatic enforceability of future obligations to the need to prove real, effective, and economically assessable harm.

3. Criteria for Quantifying Compensation

From this perspective, the Supreme Court denies that the landlord can simply claim the entirety of future rents. Instead, it establishes two fundamental criteria for determining compensable damage:a) The rents accrued until the date of the judicial resolution, a period during which the premises were vacant and susceptible to being offered on the market again.b) An additional rent equivalent to twelve months, considered reasonable compensation for the vacancy period, the search for a new tenant, and the contractual reorganization of the property.

The ruling emphasizes that compensation must be limited to real and effective damage, excluding merely hypothetical profit expectations, and that proving loss of profit requires a balanced assessment of the concurrent circumstances.

III. Practical Importance of Ruling 1469/2025

The analyzed ruling consolidates a doctrine of notable practical significance for leases for purposes other than housing:• The unjustified unilateral withdrawal of the tenant does not automatically imply the obligation to pay all rents until the contract's expiration.• However, such conduct is not exempt from legal consequences and may generate compensation proportionate to the damage actually caused.• It is up to the courts to weigh factors such as the landlord's diligence in searching for a new tenant, the reasonable vacancy period, and market conditions.

IV. Supreme Court Ruling No. 74/2018, of February 14: The Effectiveness of the Penalty Clause

1. The Case Examined

Unlike the previous case, the contract analyzed in Ruling No. 74/2018 included an express penalty clause, imposing on the tenant a penalty consisting of a percentage of the pending rents in case of unjustified early termination.

After the withdrawal, the landlord re-leased the premises immediately. The Provincial Court considered the clause to be disproportionate, as no effective damage had occurred.

2. Doctrine of the Supreme Court

The Supreme Court revokes said decision and declares the penalty clause fully enforceable, emphasizing that it was a contract concluded between business entities and that the freedom of contract enshrined in Article 1255 of the Civil Code must prevail.

The penalty clause is conceived not only as a compensatory mechanism but also as an instrument for contractual risk provision, whose enforceability does not depend on the effective existence or amount of the damage ultimately suffered.

V. Jurisprudential Contrast and Resulting Doctrine

From the comparative analysis of both rulings, the following conclusions emerge:

1. There is no uniform rule applicable to all cases of early termination of a business premises lease, the content of the contract being decisive.

2. In the presence of a penalty clause validly agreed between business entities, the Supreme Court maintains a deferential position towards freedom of contract, admitting the full enforceability of the penalty, even in the absence of effective damage (Ruling 74/2018).

3. In the absence of an express agreement on withdrawal or penalty, the landlord's claim is redirected to the realm of damages, subject to judicial moderation and proof of actual damage (Ruling 1469/2025).

4. This jurisprudential evolution introduces greater demands for proportionality and contractual balance, reinforcing the judge's role in assessing the damage actually caused.

5. Ultimately, the key to the applicable regime lies not so much in the unilateral withdrawal but in the prior contractual configuration, which decisively conditions the compensatory response of the legal system.

Article written by:

Carmen Baón Romasanta

Head of the Litigation and Arbitration Department, RLD