Clarkslegal LLP - Solicitors in Reading and London

Legal Updates

Can you recover rent after exercising a break clause?

04 December 2015 #Dispute Resolution #Real Estate


Clarkslegal, specialist Dispute Resolution lawyers in London, Reading and throughout the Thames Valley.

As any commercial landlord or tenant knows, rent is usually payable quarterly in advance.  However what happens if you have paid rent for a full quarter but you are able to end your lease by serving a break notice that takes effect during the course of that quarter.  Are you entitled to the return of rent relating to the period after the end of the lease?

A long-running case involving Marks & Spencer and its landlord, BNP Paribas, has taken this question all the way to the Supreme Court who gave Judgment on 2 December.  Although some leases expressly deal with this issue the majority do not.   The Marks & Spencer lease was silent on the point so that it was left to Marks & Spencer to argue that there must be an implied term that the rent relating to the period after termination should be repaid and that, if it was not, there would be an unfair windfall to the landlord.

Although the Supreme Court recognised that allowing the landlord to retain this rent would be unfairly prejudicial to the tenant, they decided that it would not be correct to imply a right for the tenant to be repaid.  They noted that the lease was a detailed document entered into between experienced parties and drafted by expert solicitors.  They could have provided for this but had not.  They did not therefore consider it appropriate to imply such a provision.

The solution for tenants faced with this problem is to ensure that, when negotiating the break clause when the lease is first entered into, the return of rent is expressly provided for.  That in turn will of course depend on the tenant’s negotiating position given that this has not historically been regularly conceded by landlords.

 

 

For further information about this or any other Dispute Resolution matter please contact Clarkslegal's dispute resolution team by email at disputeresolution@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

Read more articles

Antony Morris

Antony Morris
Partner

E: amorris@clarkslegal.com
T: 0118 960 4646
M: 07768 552 356

Contact

Dispute Resolution team
+44 (0)118 958 5321