What is a breach of contract?

When a party fails to comply with the lease agreement, this is called a breach of contract. It’s a concept that most businesses don’t really consider until it actually happens—and by that point, it’s often difficult to determine what actually constitutes a breach and what the consequences will be. This article provides you with an overview, whether you’re the tenant or the landlord of a commercial lease.

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Breach of Commercial Lease Agreements: Definition and Legal Framework

Breach of contract means that a party to an agreement fails to fulfill its obligations. In a lease, a breach occurs when either the tenant or the landlord violates the terms of the lease agreement or the provisions of the Commercial Lease Act. This can range from failure to pay rent to violations of the rules governing how the leased property may be used.

The key point is that breach of contract is not a single, fixed concept with a single, fixed consequence. The severity depends on what has happened, how significant the breach is to the contractual relationship, and whether the parties can remedy it. It is therefore important to be familiar with typical cases before assessing whether a specific situation actually constitutes a breach of contract.

Examples of Breach of Contract in Practice

In commercial lease agreements, breaches typically take the form of:

• Failure to pay rent — by far the most common reason why a tenancy ends in a dispute.

• Damage to the rental property that goes beyond normal wear and tear—such as broken furnishings or damage to fixtures.

• Illegal use of the leased property, where the premises are used for purposes other than those specified in the lease agreement.

• Failure to maintain the property, where the tenant does not comply with the terms of the lease.

• Subletting or moving out in violation of the lease agreement, without the landlord's consent.

When you’re looking for a new commercial lease or need to renegotiate an existing lease, you should have a clear idea of what the space will be used for and what obligations the contract imposes on you. Check out our current listings of available commercial spaces and find a space that meets your needs from the start.

From a Minor Disagreement to a Material Breach

Not all breaches of contract are equally serious. A distinction is made between minor and material (also known as gross) breaches. In the case of a minor breach—such as a single late payment or a minor breach of contract—the aggrieved party must typically give the other party an opportunity to remedy the situation before taking further action.

In the case of a material breach, the violation is so serious that it undermines the very purpose of the lease agreement. In such cases, the landlord may terminate the contract immediately, without first giving the tenant a chance to remedy the situation. The line between the two can be difficult to assess in practice, and this is precisely where a clear and flexible lease agreement makes a difference—the more clearly you define the terms from the start, the easier it is to avoid uncertainty later on. We’ve previously written about how flexibility in the lease agreement aligns with reality and reduces the risk of such conflicts.

What Happens When a Tenant Breaches the Lease Agreement

If a tenant breaches the lease, the landlord has several options depending on the severity of the breach. In the case of a minor breach, the landlord will typically send a written notice giving the tenant a deadline to remedy the situation. In the event of nonpayment of rent, special, more stringent rules apply, which we will discuss further below.

In the event of a material breach, the landlord may choose to terminate the lease immediately. This means that the tenancy ends, and the tenant must vacate the premises. Regardless of the situation, it is crucial to act correctly and in a timely manner—both to safeguard your rights as a landlord and to avoid unnecessary disputes. If you need to discuss a specific situation, you are always welcome to contact us.

The Landlord's Obligations When the Breach Is on the Other Side

Breach of contract is not limited to the tenant. The landlord may also breach the lease—for example, by failing to maintain the property as agreed, by preventing the tenant from accessing the premises, or by acting in violation of the terms set forth in the contract. If this happens, the tenant has the same right to respond as the landlord has in the event of a breach by the tenant—including, as a last resort, terminating the lease.

At Stensdal, we provide ongoing support to our tenants throughout the entire lease term, including through our service hub, where you can find relevant information and contact us if any questions arise along the way. A good working relationship between tenant and landlord is often what prevents a disagreement from escalating into a breach of contract in the first place.

Normal wear and tear or misuse? Here's how to tell the difference

One of the situations in which the threshold for breach of contract is often debated is when a tenant moves out. In this case, it is important to distinguish between normal wear and tear and actual damage.

Normal wear and tear refers to the expected deterioration that a rental property undergoes through ordinary use—for example, slight wear on the paint, minor marks left by furniture, or holes left by mounted shelves and pictures. As a general rule, the tenant is not liable for this.

Damage caused by neglect, on the other hand, refers to damage that goes beyond normal wear and tear—such as large holes in walls, burn marks, or damaged furnishings. The landlord may require the tenant to pay for this type of damage upon moving out.

A little ongoing maintenance during the lease term can prevent many of the disputes that arise over normal wear and tear. For smaller tasks, we’ve put together a series of DIY guides to help you keep the rental property in good condition—and thus reduce the risk of disagreements when it’s time to return the property.

Procedure for Non-Payment of Rent

Failure to pay rent is the most common form of breach of contract, and the process follows fixed, legally prescribed steps. If the tenant does not pay on time, the landlord may send a demand letter no earlier than three days after the agreed-upon payment deadline. The demand letter must state that the landlord may terminate the lease if the tenant has not paid the rent within 14 days of receiving the letter.

If the tenant still has not paid by the time the deadline expires, the landlord may send a notice of termination and terminate the lease. This process requires that you follow the proper formalities—both to protect the landlord’s legal position and to ensure fair treatment of the tenant. If you have questions about a specific case involving nonpayment, you can find help in our Help Center, or you’re welcome to contact us directly.

How to Minimize the Risk of Disputes

The best way to avoid a breach of contract is to prevent it before it even occurs. It’s largely a matter of choosing the right commercial space and the right lease from the start—so that the terms align with your business’s actual needs and day-to-day operations. We’ve previously shared tips on finding the right commercial space in a volatile market, which are also relevant when it comes to avoiding conflicts later in the lease.

Beyond that, it’s all about ongoing communication: If a payment is delayed, you discover damage, or someone overlooks a maintenance task, it’s often cheaper—and less damaging to the working relationship—to get in touch right away rather than letting it escalate into a breach of contract.

A Brief Overview of Breach of Contract

• A breach of contract occurs when the tenant or landlord fails to comply with the lease agreement or the Commercial Lease Act.
• Failure to pay rent follows a set process that includes a demand letter, a 14-day grace period, and, if necessary, a notice of termination.
• Both tenants and landlords can be at fault for a breach of contract—it is not solely the tenant’s responsibility.
• Distinguishing between normal wear and tear and damage is crucial when moving out—clarify this on an ongoing basis, not just when it’s time to hand over the rental property.
• Clear lease terms and ongoing communication are the best way to prevent disputes over breaches of contract.

Frequently Asked Questions About Breach of Contract

What constitutes a breach of a commercial lease?

A breach of contract occurs when the tenant or landlord fails to comply with the obligations set forth in the lease agreement or the Commercial Lease Act—for example, by failing to pay rent, causing damage to the leased property, or using the premises unlawfully.

What happens if a tenant breaches the lease?

Depending on the severity of the situation, the landlord may either give the tenant a deadline to remedy the situation or—in the event of a material breach—terminate the lease immediately.

How long does a tenant have to remedy the breach before the landlord can terminate the lease?

The tenant has 14 days from receipt of the demand letter to pay the rent before the landlord can send a notice of termination. For other types of breach of contract, the deadline depends on the specific situation.

Can a landlord also be found in breach of contract?

Yes. For example, if the landlord fails to maintain the rental property as agreed or prevents the tenant from accessing the premises, this also constitutes a breach of contract—and the tenant has the same right to take action as the landlord does in the event of a breach by the tenant.

Jette Justesen

Jette is a Senior Property Manager at Stensdal with over 20 years of experience in property management. Drawing on her broad and practical expertise, she writes about operations, utility billing, and the management of commercial properties.

Read more about Jette