Is The Tide Beginning To Turn In Favour Of Tenants In Relation To Breaks In Leases?

For the first time the High Court has in the recent decision of Morgan J in Marks & Spencer Plc - v - BNP Paribas Securities Services Trust Co. (Jersey) Limited [2013] EWHC 1279 held that where a full quarter's rent had to be paid in order to comply with a lease break, there was an implied term entitling the tenant to repayment from the landlord of the proportioned overpayment for the part of the quarter falling due after the break date.

Most break clauses provide that as a pre-condition of exercising the break all rent needs to be paid in full, which means that in order for a break to be effective a tenant has to pay the full quarter's rent without apportionment even if the break date falls mid-quarter. However, until this decision it was generally considered that a tenant was not entitled to a reimbursement of any sums "overpaid" referable to any period after the break date.

In this case the court held that although there was no express provision in the lease entitling the tenant to recover any overpayment, there was an implied term to that effect. This was essentially on the basis that a reasonable person reading the lease would expect that where a break took effect, rent would be payable for the period leading up to the break date but not for any period beyond that. The break was only effective if various conditions had been met including that there were no arrears of basic rent. Another of the conditions was a payment on or before the break date of an amount equivalent to one year's basic rent. That indicated that the parties had already determined how the landlord would be compensated for the tenant...