Marks and Spencer case breaks down barriers for landlords

March 11, 2014


A recent case involving high street giant Marks & Spencer highlighted a number of issues relating to the break clause and, in future, should make it easier for landlords to recoup losses under the clause.

The case – Marks and Spencer PLC v BNP Paribas Securities Services Trust Company (Jersey) Ltd & Anr [2014] – saw M&S exercise the break clause under their lease – which meant they had to pay rent to the end of the rental quarter and a penalty to the landlord under the lease.

There was much discussion about whether a tenant who exercised a break clause should be refunded rent and other payments for the period after the break date, although in this case, the lease did not provide for this.

Effectively, M&S paid all relevant sums and negotiated post-event by applying to the High Court to recover the excess rent which had been paid.

Rhodri Lewis, Partner in our Property Litigation team, has been involved in a similar case recently, relating to the exercise of a break clause in a lease. It was argued that vacant possession (which was a condition of exercising the break clause) was not given because the tenant had left shop display furniture in the premises.

The matter was referred to arbitration and we were successful after the arbitrator found that vacant possession had not been given, so the lease was still ongoing and the tenant found itself in substantial rental arrears, with interest plus cost penalties.

M&S’ case highlighted some of the commercial aspects to consider when a right to exercise a break clause is included in a lease. The High Court upheld that the parties could not have intended the landlord to have the excess rent as well as the penalty payments and therefore ordering that the excess rent be repaid.

Once the landlord appealed, the COA overturned the High Court’s decision stating that if there was no such express term it could not be implied and M&S was refused permission to appeal.

It was unexpected for the Supreme Court to then grant permission for M&S to appeal the COA’s decision on 11 November 2014.

It may be that the appeal was allowed because the Supreme Court intends to reassess break clauses generally and evaluate whether terms should be implied into leases in order to achieve a commercially ‘fair’ result. There is, therefore, potential for this area of law to shift substantially, although the date of the Supreme Court hearing has not yet been set and it also remains to be seen if the matter is challenged by M&S in the Supreme Court.

This is an interesting case, which illustrates how both landlords and tenants need to be aware that in the current market, litigation about break clauses is more common and can ultimately prove very expensive.

If you are looking to break a lease, you should ensure that you consider the provisions of the break clause carefully and take appropriate advice on what exactly is required.

Contact Our Team
Catherine Burke
View Profile
Damian Phillips
View Profile
Fflur Jones
Managing Partner
View Profile
Gareth Wedge
View Profile
Mark Rostron
View Profile
Nick O’Sullivan
View Profile
Owen John
View Profile
Rhodri Lewis
View Profile
Stephen Thompson
View Profile

I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”

Becs Beslee, Dice FM Ltd

Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”

Rebecca Cooper, ACT Training

We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”

Karen Gale, Stepping Stones Group

An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”

Gwawr Booth, Portal Training Ltd

PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”

Ledia Shabani, Property Support Services UK Ltd

We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”

Guto Bebb, Farmers’ Union of Wales

Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”

Iwan Hywel, Mentrau Iaith Cymru

My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”

Margot Adams, Guarding UK Ltd