Time for a break? Break clauses in commercial leases and apportioned rent

The eagerly awaited Supreme Court judgement in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd & another [2015] UKSC 72 was handed down today, and provides clarification on the right for a tenant to reclaim the apportioned rent (payable in advance) which covered the “expired” term of the rent period, following the determination of the lease.

The Claimant, Marks and Spencer plc, was a tenant under four sub-under leases of different floors in a building known as The Point, in Paddington Basin, London W2.  The lease for the third floor was granted for a term of years starting on 25 January 2006 and ending on 2 February 2018.

The lease held that the Claimant may give the Defendant 6 months’ prior written notice to take effect on the “first break date”, being 24 January 2012, or a “second break date” of 24 January 2016.  The notice would take effect provided that if, on the break date, there were no arrears of rent, including VAT.

The Claimant did serve a break notice on the Defendant to determine the lease on 24 January 2012, and shortly thereafter paid the rent for the quarter from that date up to and including 24 March 2012, resulting in an effective break notice, determining the lease on 24 January 2012.

As there was no express provision in the lease which says the Defendant was required to refund an apportioned amount of rent, it fell to the Claimant to prove an implied term.  A number of submissions were made by the Claimant, including the “business efficacy” test in Arnold v Britton [2015], however the arguments were not enough to persuade the Court, and the appeal was dismissed.  The Court held that the parties took great care in considering the wording of the lease, and it would not be appropriate to imply the term subject to this argument, nor go against what is currently set out at common law and statute on this point.

This serves as a reminder that it is always appropriate to seek legal advice when exercising your right to rely on a break clause, as there are many factors to consider.  Our property litigation department can assist you with this process, and they can be contacted on 01905 730462.

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