Supreme Court decides against M&S in break clause case

17 December

The eagerly anticipated Supreme Court decision in the Marks & Spencer break clause case has restored the widely accepted view that a tenant should not be entitled to a refund for any rent paid in advance relating to periods after a break date, unless this is expressly provided for in the lease.

M&S had exercised an option to break a lease of office space in London and duly paid a full quarter’s rent, in advance, on the 25 December 2011. The lease required the rent to be paid in advance on the usual quarter days and it was a pre-condition of the break clause that all rent be paid up to date. Following the break date, which fell in January 2012, M&S made a claim to its landlord for a refund of the sums paid in advance which related to the period after the lease had ended, a claim promptly rejected by the landlord.

Even though the Supreme Court acknowledged that M&S had a very strong argument and that it was reasonable and equitable for such a refund to be made, this was not enough for it to find in its favour. It refused to imply such a term into the lease and the landlord did not have to refund the £1.1 million sum involved.

It is therefore of vital importance for tenants when negotiating lease terms that any break clause contains a provision obliging a landlord to refund rent and other payments made in advance, relating to the period after a break date.

Break clauses contain many traps for the unwary and failure to adhere strictly to the provisions of the lease in this regard can result in a tenant being denied a break right and being obliged to continue with the lease. Whether you are considering exercising a break or negotiating the terms of a break clause in a new lease, our commercial property team can offer expert advice in this area.

 

If you need advice in relation to a lease issue, please call and ask to speak to a member of our commercial property team. 

Catherine Burke – Senior Associate 
Commercial Property Team
DDI: 029 2082 9112
cburke@darwingray.com

December 2015

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