Tenants Beware! Landlords Not Obliged to Refund Advance Rental Payments After Tenant Exercises Break


The Supreme Court has ruled that there is no right to a pro-rata refund of rent implied into a lease if the break date falls within a rent quarter.

Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) and another [2015] UKSC 72

Summary of the facts

The tenant had exercised a break clause, ending the lease early. It sought a refund of parts of payments it had made in advance in respect of rent, service charge, car parking and insurance charges, which related to a period after the break date.

The tenant argued that there should be implied into the lease a term obliging the landlord to refund the apportioned rent, so that even in the absence of an explicit obligation, the tenant would be reimbursed for the period beyond lease termination.

Decision

The Supreme Court disagreed. They found that, save for exceptional circumstances, an express term would be needed to entitle a tenant to a refund of rents paid in advance. In giving its judgment the Supreme Court took the opportunity to clarify the law on implied terms generally and to confirm that the Apportionment Act 1870 does not apply to rent payable in advance.

Conclusion

As a result of this decision, it is important for tenants to ensure that a break right includes an express obligation on the landlord to refund advance payments relating to the period after a conditional break date. If the landlord refuses this negotiation the tenant may prefer to ensure that the termination date is on the last day of the quarter.

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