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Tenants Urged to Scrutinise Leases After Landmark M&S Break Clause Ruling

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This week’s Supreme Court ruling - which dismissed a challenge by M&S that a term should be implied into its lease with landlord BNP Paribas - highlights the importance of tenants checking their break conditions.

M&S LogoIn 2011 M&S exercised a break in its lease to serve notice on the four floors it rented at The Point in Paddington and ending the lease in January 2012.

Following the service of notices, one condition of the break was that there should be no arrears of rent on the break date, as well as a further break sum being payable. M&S was seeking a refund of £1.1 million as it paid its rent in advance and wanted to recover what it claimed to be an ‘over payment’ in respect of the rent paid for the period after the break.

The Supreme Court`s decision confirmed that a term would not be implied into a lease requiring an over payment of rent to be returned to a tenant where a break date fell between two rent payment days - and where the tenant had paid for a period of occupation after the lease had ended.

The case confirms the generally held view that unless the lease specifically states otherwise, overpayments of rent are not recoverable. This will come as some relief for landlords, who could have found themselves subject to claims from tenants seeking recovery of such “overpaid” rents going back for several years.

The judgement reinforces the importance of tenants reviewing their leases in detail and complying with break requirements - even if that means an over payment of rent.

In some cases, it may be possible to pay an apportioned sum on the last rent payment date before the break date - but the express terms of the Lease and any conditions attaching to the exercise of the break must be carefully considered.

For more information on this issue contact Liz Henwood on 0114 2521442 or email her on lizhenwood@hlwkeeblehawson.co.uk.

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