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Legal Updates

Break clauses and overpaid sums

10 November 2014 #Real Estate


The Court of Appeal has recently reversed the decision of the High Court in the controversial case of Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and (2) BNP Paribas Securities Services Trust Company Limited [2013].

The High Court ruled that a term was to be implied into the lease which allowed the tenant to recoup sums, after exercising a break clause, in respect of the period after the break date. The decision created some uncertainty for landlords and tenants as to whether a term could be implied into all leases or just a lease with the same wording and with the same facts.

The decision itself denied BNP Paribas of a significant amount of rent and therefore the landlord appealed and the “implied term” argument has now been rejected by the Court of Appeal. The court held that the test for the implication of a term is whether, even though the parties did not expressly include the term in their agreement, that is what their agreement actually means. The Court stated that it must be shown “not simply that the term could be a part of the agreement, but that the term would be a part of the agreement.”

It is now clear that if tenants want to be able to claim back “overpaid sums” then the lease must include an apportionment clause which is correctly worded. The court will not imply a term into the lease unless it is necessary to do so to achieve the express agreement the parties reached.

This latest decision highlights how important it is that tenants properly comply with break conditions. Tenants must also carefully negotiate break rights from the outset and make clear provision for apportionment where a break is to operate part way through a quarter.

Clarkslegal, specialist Real Estate lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Real Estate matter please contact Clarkslegal's real estate team by email at realestate@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Simon Ralphs

Simon Ralphs
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