Are you just about to serve a break notice or have you just
If so, it is probably a good time to remind yourself of the case
of Marks and Spencer plc v BNP Paribas Securities.
This case has provided welcome clarity on the issue of rents paid
in respect of a period falling after a break date in a lease, where
such break has been validly exercised.
Marks and Spencer plc (the "Tenant") v BNP Paribas
Securities (the "Landlord") was an appeal case decided in
early December 2015. Briefly, the facts of the case related to
various leases held by the Tenant in an office building in
Paddington. These leases gave the Tenant the right to break on two
separate occasions, the first of which was 24 January 2012. The
break right was subject to the following conditions:
"on the break date there are no arrears of Basic Rent
or VAT on Basic Rent; and.....on or prior to the First Break Date
the tenant pays to the landlord the sum of £919,800 plus
The latter condition was not applicable at the second break date
The Tenant served a valid notice to terminate in July 2011. On
25 December 2011, the quarter day before the break date, the Tenant
paid to the Landlord a full quarter's rent, advance service
charge and car parking licence fees. The Tenant had already paid
the full years insurance rent following a demand in July 2011.
A week before the break date, the Tenant paid the break premium
of £919,800 + VAT. The break was therefore now fully
Following termination, the Tenant sought a reimbursement of the
overpaid rent, insurance rent, service charge and car-parking fee
for the period after the termination date until the end of that
quarter. The Landlord refused.
Initially the High Court ordered the Landlord to repay the
overpayments having implied a term obliging the Landlord to return
them. On appeal, the Court of Appeal and now the Supreme Court
overturned this ruling, stating that no term can be implied into
the break clause requiring the return of overpaid rents.
Whilst each case will be decided on its particular facts, in the
Supreme Court hearing, Lord Neuberger stated very clearly that
there would have to be exceptional circumstances for the court to
imply into a commercial lease the kind of term for repayment of
rent sought by the Tenant in this case.
It is worthy of note that had the Tenant paid the break premium
prior to 25 December 2011, then it could have merely paid the
apportioned rent up to the break date as the break conditions would
have already been met.
So what does this mean for you?
Clearly, if you are a tenant, when negotiating a break condition
in leases that have yet to be granted, an express provision should
be inserted regarding the overpayment of any rents paid that relate
to a period after the break date.
If you are a landlord and a tenant has made a claim for the
reimbursement of overpaid rents, then you should review the lease
terms to see if an express provision has been included before
returning any monies.
In respect of leases that have already been granted, we would
suggest that you review the leases very carefully to ascertain what
conditions need to be met prior to exercising a break. Certainly,
if you are a Tenant, ensuring compliance with all pre-conditions
before the Break Date will mean that you should only need to pay
the apportioned rent up to that Break Date to achieve compliance
with the usual condition that 'all rents and other sums are
Be you Landlord or Tenant, please do not hesitate to contact us
if you require advice on any break clause that may be contained in
any of your leases.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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