August 12, 2013

Break dates and rent recovery under commercial leases

The recent decision in the case of Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2013] marked a departure from the widely accepted view that in the absence of an express provision in a lease a tenant will not be entitled to a refund of rent that has been paid in advance for a period of time following a break date.

In this case the tenant exercised a break right part of the way through a quarter when the tenant had already paid rent for the full quarter. The High Court held that there was an implied term in the lease that entitled the tenant to a repayment of the rent already paid from the break date to the end of the quarter. The judge also commented however that he would not imply a similar term where a lease came to an end by way of forfeiture and there was to be a distinction between this case and other cases involving forfeiture.

Regardless of this decision a commercial tenant would be well advised to make sure that in their lease there is an express provision dealing with the repayment of rent from the break date to the next quarter date and this is extremely important when the right to break is conditional upon the tenant paying a full quarter of rent in advance.  An express clause would avoid any dispute in the future with the landlord with regards to the repayment of rent to a tenant who has exercised their break right.

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