Marks and Spencer lost its appeal against former landlord BNP Paribas in a landmark break clause case that was referred all the way to the Supreme Court.

In 24th January 2012, M&S exercised a break clause to end the lease on a property in Paddington. The break clause fell between rent payment days and M&S had paid rent on a quarterly basis up to 23rd March 2012. They were subsequently looking to recover a refund for the two months’ rent after the break date.

Supreme Court’s Decision in M&S Break Clause Appeal

The dispute was taken to the High Court in May 2013 where a controversial decision was made to allow M&S to reclaim the lost rent by implying a term into the lease. This went against a previously long held view that without a clear and express apportionment provision, the tenant is not entitled to a refund.

This decision was then overturned by the Court of Appeal a year later and was referred to the Supreme Court where a decision was made last week to dismiss the appeal. The reason this case is important for the property industry is that if M&S had been successful, it would have likely led to a substantial number of tenants coming forward to claim rent and charges to be refunded from Landlords, even if it wasn’t written into their lease contract.

Implications for Tenants and Landlords in Commercial Property Leases

The Supreme Court made it clear that unless a term is ‘so obvious that it goes without saying’ or ‘satisfies the test of business necessity’, it will not be implied.

The judgment demonstrates the need for tenants to be properly informed and legally advised on their break options from the beginning where all intended refunds can be provided for and agreed. It also provides all tenants, landlords and solicitors with a clear line and certainty of what is required within the lease.

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