Penalty Clauses

Leases may provide for interest to be payable at a higher rate in the case of arrears of rent:

interest is recoverable and is not unenforceable as a penalty clause: Lordsvale Finance plc v Bank of Zambia, The Times, 8 April, 1999.

a provision requiring rent that would otherwise be calculated by reference to the tenant's receipts to be calculated by reference to an open market rent is also not unenforceable as a penalty clause: Crown Estate Commissioners v Possfund Custodian Trustee Ltd [1996] EGGS 172.

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