Today the Supreme Court issued the eagerly awaited judgement in the Marks and Spencer v BNP Paribas case.

In this case, a landlord granted to M&S a lease from 2006 to 2018. The rent was substantial, and the lease included a car park licence fee, a service charge and an obligation on M&S to reimburse the landlord for the costs incurred in insuring the building.

The lease entitled M&S to determine the lease on 24 January 2012 by giving the landlord six months’ prior written notice. The break notice would be effective only if

(a) There were no arrears of rent on the 24 January 2012 and
(b) M&S paid a premium (about £920,000) to the landlord.

M&S served the break notice on 7 July 2011. Shortly before 25 December 2012 M&S paid the rent due for the period up to 24th March 2012 [i.e. beyond the break date]. On or about 18 January 2012, M&S paid the premium.

As a result of these payments, the break notice was effective and the lease determined on 24th January 2012.

Subsequently, however, M&S brought a claim for the return of the rent paid beyond the break date. Namely, they sought an apportionment of the rent and a refund of the rent paid for the period 25 January 2012 to 24th March 2012. There was no express clause in the lease entitling M&S to a refund. Instead, M&S argued that there should be implied into the lease a term that, if M&S exercised the break clause, M&S should receive a refund from the landlord of the rent paid for the period beyond the break date to 24th March 2012. M&S claimed not only the basic rent, but also the car park licence, service charge and insurance contributions. The sums involved were considerable.

M&S won in the High Court.

The landlord won in the Court of Appeal.

The landlord also won in the Supreme Court.

The Supreme Court reminded us all that a term will only be implied if it satisfies the test of business necessity or it is so obvious that it goes without saying.

In a commercial lease, said the Supreme Court, it is well established that neither under the common law nor statute is rent payable in advance apportioned on a time basis. Therefore, said the Supreme Court, it would be wrong (save in a very clear case) to attribute to a landlord and tenant an intention that the tenant should receive back an apportioned part of rent paid in advance.

Moreover, in this case, the Supreme Court were aware of and influenced by the fact both M&S and the landlord entered into a full and professionally drafted lease.

So, M&S were not entitled to any repayment.

Therefore, if you are a tenant, and expect to be refunded rent paid beyond a break date, you will need to seek to include a specific clause entitling the tenant to be repaid rent paid in advance beyond the break date. Alternately, the tenant should try and ensure the break date coincides with the end of a rental period.

Mark SellersMark Sellers
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