Unfair Commercial Lease Case Benefits Landlords

Commercial leases usually require tenants to pay rent in advance but is the tenant entitled to a refund of overpaid rent payments if the lease is brought to an end during its term?

Not according to the Court of Appeal on the facts set out in Marks & Spencer plc v BNP Paribas Securities Services. The Court decided that the tenant was not entitled to a refund because the lease expressly provided that rent would be paid in advance, but did not expressly provide that if a break clause was implemented, the tenant would get a re-payment of overpaid rent. With no express wording the Court refused to imply wording for a refund to over-ride the express pre-payment requirement.

The Court upheld the general principle that clear wording in a deed could not be changed by implication, and the parties could easily have added in wording to ensure the tenant got a refund for pre-payment of rent.

"Whilst I can see the legal logic for this, it seems wrong and unfair to me" says Partner and Head of the Commercial Department, Gillian Jones. "Tenants will now need to seek careful advice on the wording of break clauses so that they do not need to make unnecessary rent payments. The law simply seems to be unfair in these circumstances."

If you are a commercial landlord or tenant concerned about the exercise of break clauses in your leases then please contact Gillian Jones well in advance of the exercise of any break clause to discuss your options.


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