Court of Appeal overturns Marks and Spencer's successful claim for overpaid rent following lease break

Court of Appeal overturns Marks and Spencer's successful claim for overpaid rent following lease break

The facts:

Marks and Spencer (M&S) were tenants of four floors in a building under four leases on the same terms. They served notice to break the leases. The break clause was conditional on there being no arrears of basic rent or VAT on the basic rent and on payment of a lump sum of just under £1 million – reflecting exactly a year’s rent.

The break date fell in the middle of a quarter. On the quarter day prior to the break date, M&S paid the full quarter’s rent, full quarter’s ‘car park licence fee’ (which the court described as a further rent) and the full quarter’s on-account service charge. Approximately six months prior to the break it also paid a year’s insurance premium. In Marks and Spencer v BNP Paribas Securities Services [2013] EWHC 1279 (Ch)  the High Court allowed its claim to be reimbursed the sums owing for the period after the break date.

The Court of Appeal allowed the landlord’s appeal, deciding that the lease, read as a whole against the relevant background, would not reasonably be understood to include a term providing for such reimbursement and so the test for an implied term was not met.

Why did M&S pay over sums owing for a period after the lease was terminated in the first place?

If a break date falls between rent payment dates (usually quarter days) and the rent is payable in advance, then, if the lease is silent, the safest route is to pay the full quarter’s rent to ensure the break condition is satisfied.

Are tenants generally entitled to repayment of rent in such circumstances?

M&S’ leases were silent on the matter. In those circumstances, traditionally, tenants have been unsuccessful in getting credit for any part of the rent paid in advance in respect of the period after the break option. In Quirkco Investments v Aspray Transport [2011] EWHC 3060 (Ch), it was held that wording in the lease which confirmed the rent was

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About the author:
Joanna is a commercial property specialist. Prior to joining the LexisPSL Property team, she was a transactional lawyer. She qualified in 1995 at Shoosmiths and subsequently worked at Nabarro, Charles Russell, Bircham Dyson Bell and Pemberton Greenish. She has wide-ranging experience of all non-contentious property transactions, with a particular emphasis on landlord and tenant work.