Break Notices – Important Ruling for Commercial Landlords

Break Notices – Important Ruling for Commercial Landlords

Is a tenant entitled to a refund if the break date is between rent payment dates?

The following ruling makes it clear that when negotiating a lease for a tenant that contains a break clause, the tenants' lawyers should advise their clients that they should seek a refund of rent and any other payments for the period from and excluding the break date up to and excluding the next rent payment date.

Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2014] EWCA Civ 603

In this case the Supreme Court found in favour of the landlord, dismissing the tenant's appeal of the Court of Appeal decision.

The tenant (T) had exercised a break clause, ending the lease early. T sought a refund of parts of payments it had made in advance in respect of rent, service charge, car parking licence fee and insurance charges relating to the period after the break date. The issue of the repayment of the service charge had been settled during the High Court proceedings. By the time the matter came before the Court of Appeal, T was only seeking repayment of the rent, insurance charge and the car parking licence fee.

The Supreme Court, agreeing with the Court of Appeal, ruled that it was not appropriate to imply a term into the lease that entitled T to a refund of the rent, car parking licence fee and insurance charges that it had paid in advance in accordance with the express terms of the lease.

Landlord and tenant lawyers will be pleased to note that Lord Neuberger (who provided the leading judgment) approved the Court of Appeal decision in Ellis v Rowbotham [1900] 1 QB 740. In Ellis, the Court of Appeal held that the Apportionment Act 1870 did not apply to rents payable in advance, only those payable in arrear.

Some commentators had expressed doubt as to whether Ellis had been correctly decided. This decision now puts it beyond doubt.

For for further advice contact a member of our Commercial Property team.


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