Recently the Supreme Court decided the case of Marks and Spencer vs BNP Paribas. The key point in dispute was whether on exercising a break clause a tenant is entitled, by an implied clause, to repayment of rent paid in advance relating to periods beyond the break date. At first instance the High Court said yes. This contradicted previously established case law. The Court of Appeal reversed this decision and leave was granted for appeal to the Supreme Court.
The Supreme Court have upheld the decision of the Court of Appeal and settled the point. Consequently in the absence of an express clause in the lease a tenant would not get back rental payments made for periods after the break clause. In the above mentioned case this was a substantial sum.
For Landlords this is good news. For Tenants the best advice is to seek a rolling break rather than a fixed break and try to time breaking the lease to comply with the end of a rental period. Alternatively negotiating fixed break dates to coincide with a rent period is good advice.
The other solution is to negotiate into the lease a clause requiring repayment. Where Landlords have the upper hand in negotiations for a lease they may resist this. Another solution may be to seek monthly rather than quarterly payments for rent to minimise the sums involved. The same goes for other sums reserved as rent such as insurance rent, service charge etc. (often paid annually).
What is clear is that courts remain reluctant to imply terms into leases unless there has been clear evidence that it was the settled intention of the parties. They will generally also only be satisfied where the clause is required to make the lease work and does not contradict anything else in the lease.
For advice in relation to commercial leases please speak to our Commercial Property partner James Dunn telephone number (01756) 692 875 or email james.dunn@awbclaw.co.uk
James Dunn
Partner and Commercial property Solicitor
Tel: (01756) 692 875
Email: james.dunn@awbclaw.co.uk
