Legal Updates

A lessee who terminates a lease agreement without prior notice may pay damages to the lessor

December 12, 2023

A lessee terminated the lease agreement due to the lessor's failure to build a plaster wall in the leased property.

The Court accepted the claim and held that the lessee unlawfully terminated the agreement and must pay damages. A materiel breach, whether agreed or apparent, grants the harmed party the right to terminate the agreement without prior notice. The right of termination for a non-materiel breach is subject to the harmed party first granting the breaching party an extension to the performance of the agreement with the breach not being remedied within a reasonable time. Here, the parties stated in the agreement that the lessor would build a plaster wall in the meeting room. The agreement did not specify a date for the construction of the wall, the provisions of the agreement did not link the date of the lessee’s entry into the offices to the construction of the wall and this obligation was not defined as a material condition. The lessor waited with the construction of the wall until a bank guarantee was provided by the lessee, but the lessee demanded to receive back the checks it gave and announced of an immediate termination of the agreement. Considering that the estimated time for the work was short and the with lower cost of a few thousand shekels, the lessee's unilaterally withdrawal from the agreement without prior notice was done in bad faith and unlawfully. Therefore, the lessee must pay damages to the lessor.