More good news for landlords in break clause appeal

23 May, 2014

Following the case of Friends for Life Limited -v- Siemens Hearing Instruments Limited, which was featured on plog. here the Court of Appeal has allowed the landlord’s appeal in the much-anticipated case of Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Limited & another [2014] EWCA Civ 603.

M & S’s lease provided that rent was payable in advance on the usual quarter days “proportionately for any part of the year”, and allowed M & S to break the lease on 24 January 2012, subject to there being no arrears of basic rent and the payment of a break premium. There was no provision covering the payment of rent between a payment date and the break date. M & S served a valid break notice in July 2011, paid the December quarter’s rent in full and paid the break premium on 18 January 2012. M & S then sought repayment of the rent it had paid for the period from 25 January 2012 to 24 March 2012.

The lower court found that a term could be implied into the lease meaning M & S was entitled to this refund. The overturning of this decision has been welcomed by landlords as a return to the widely accepted legal position that unless express provision is made, a tenant is not entitled to a refund of any rent paid that relates to a period after a break date until the end of a quarter.

Tenants will want to try to negotiate their leases so that the break date is the last day of a rent period and express provision is made for rent to be apportioned following a break. If there is any concern about the exercise of a break right advice should be taken early.