Tenant Not Entitled To A Refund - Break date between rent payment dates
Last month the Supreme Court gave judgments that will not please commercial tenants.
In the past, if a tenant successfully exercises a break clause in its lease, the landlord will not usually be obliged to refund to the tenant any rent paid in advance for the period after the date that the lease terminates, unless the lease expressly requires the landlord to do so. Prior to the recent Marks & Spencer decision, many tenants considered that a landlord should refund any such advance rent paid as a matter of fairness, if not legal entitlement.The M&S decision makes it clear that, although the application of relevant legal principles may be unfair prejudice to the tenant or a windfall for the landlord, such consequences are not likely to be sufficient to force the landlord to make a refund.
In this case the Supreme Court found in favour of the landlord, dismissing the tenant's appeal of the Court of Appeal decision.
The facts of the case are that M&S had exercised a break clause, ending the lease early. M&S sought a refund of parts of payments it had made in advance in respect of rent, service charge, car parking licence fee and insurance charges relating to the period after the break date.
The Supreme Court, agreeing with the Court of Appeal, ruled that it was not appropriate to imply a term into the lease that entitled M&S to a refund of the rent, car parking licence fee and insurance charges although it was entitled to a refund in relation to the service charge in accordance with an express term of the lease.
It is also pleasing to note that the law lords approved the Court of Appeal decision in Ellis v Rowbotham [1900] 1 QB 740. In Ellis, the Court of Appeal held that the Apportionment Act 1870 did not apply to rents payable in advance, only those payable in arrears.
This decision has been eagerly anticipated and will be welcomed by landlords as it provides clarity and certainty.
Posted on 01/04/2016 by Ortolan
