The Supreme Court has unanimously dismissed Marks & Spencer’s challenge to an appeal court judgment, which is likely to have far reaching implications for contracts across all sectors. The Court found in favour of the landlord, meaning there is generally no implied term in a lease (where rent is paid in advance) entitling a tenant to a refund of rents if a break is exercised. If a tenant wants a refund of rents relating to the period after which it has vacated the premises, it must write an express provision into the Lease.
Background to case
M&S leased office space at The Point building in Paddington, London. In 2011 they exercised a break in the lease to serve notice on four floors, ending the lease in January 2012. Following service of the notice they paid the December quarter’s rent in full (even though the leases were to terminate a month later) together with a break premium. After the lease ended M & S then claimed (as is common practice) that they were entitled to a refund of rent for the period after which they had vacated.
The High Court agreed with the tenant and found that a term should be implied into the lease, to allow for a tenant to recover money relating to the period beyond a break date. The Court of Appeal disagreed, arguing that a lease would not reasonably be understood to include such an implied term.
The Supreme Court have agreed with the Court of Appeal, ruling it would be wrong to attribute to the parties any intention that the tenant should receive a refund of rent payable and paid in advance. This re-establishes the position that if parties intend rent to be apportioned after a break it must be expressly provided for in the lease.
This decision is not just relevant for property cases but has a much wider application as regards what terms the court may imply into a contract as a matter of necessity.
Tenants need to ensure that their break right within a Lease is correctly drafted.
For any advice in this respect or to discuss the above please contact Rachel Duncan at Boyes Turner LLP on 0118 952 7246 or email [email protected].
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