The judgment of the UK Supreme Court , given on 2 December 2015, has sent a clear message that there is no implied provision in leases that a tenant can reclaim over-payment of rents following the service of a break clause.
M&S exercised its right to break the lease and then claimed a refund from the landlord in the sum of £1,147,696.25 for the rents paid in advance beyond the break date. As is usual in modern leases, M&S paid its rents in advance. As is often the case, the break date fell between two rent payment dates. There was no express provision in the lease that stated that the tenant had a right to a refund of these rental sums. The UK Supreme Court rejected the tenant's argument that there was an implied right to a refund.
What does this mean for tenants? When entering into a new lease the tenant should ensure, if the break falls between two payment dates, that there is an expressed term for a refund for rents paid beyond the break date. Where the lease contains no such provision the tenant should budget for the full quarter's rent in addition to any break premium payable. Whilst it likely many landlords will return the additional monies, the tenant should be aware that the landlord is legally entitled to retain the full rental payment. Irish tenants need to be aware of the potential impact of this decision as English cases are persuasive in Irish courts.
After years of uncertainty, the Supreme Court has now provided substantive guidance concerning the apportionment of rent paid by a tenant in advance for a period after a break date. M&S, the former tenant under the relevant leases, was unsuccessful in its appeal. Consequently, its former landlord, BNP Paribas, will now be entitled to keep all of the rent paid to it by M&S, including the sums it was paid in advance in respect of the period after M&S’s break date.