A warning on break clauses in commercial leases from Marks & Spencer
In a landmark decision concerning break clauses, the Supreme Court has confirmed that it is not appropriate to imply a term into a lease to entitle a tenant to a refund of any rent or other charges paid in advance, if those charges relate to a period after a break date and if there are no express provisions to this effect in the lease.
Marks & Spencer sought to reclaim £1.1 million of rent and other charges paid in advance to its landlord, which related to a quarter beginning on 25th December, having exercised its right to break the lease on 25th January. The Supreme Court pointed out that the parties had entered into a full and professionally drafted lease that addressed the specific question of what payments were to be made between them in relation to the break clause, so it was not right retrospectively to imply terms into it. This re-enforces the basic legal principle that rent payable in advance cannot be apportioned at a later date.
This decision will be a relief to landlords and will serve as a warning to tenants and their advisors to make sure that express terms are included in a lease to deal with these circumstances, both in relation to the rent and other charges payable under a lease.
Whilst break clauses can offer flexibility to both parties to a lease, this case has added a further level of complexity to an area of law that already had a high potential for dispute. Landlords and tenants would both therefore be well advised to seek advice to protect their interests when negotiating a break clause in a commercial lease.
Fenella Eddell is a solicitor in the property department at Barker Gotelee, Suffolk solicitors.