Partner Article

What the Marks and Spencer Plc v BNP Paribas case means for landlords

It is safe to say that normal service has been resumed with regard to break clauses in a lease – much to the relief of landlords.

Following the landmark - and thoroughly unexpected - ruling in the case of Marks and Spencer Plc v BNP Paribas in May last year, the landscape appeared to have changed significantly.

Previously, the widely accepted situation was that, without express provision in a lease to the contrary, a tenant would not be entitled to a refund of any rent paid that relates to the period after a break date was overturned.

However, last year’s ruling confirmed that there could be circumstances in which an entitlement to a refund can be implied into the lease, even if not explicitly stated. This then resulted in M&S exercising the break in its lease and secured a rent reimbursement for the full quarter’s rent it had paid in advance.

The ruling by Mr Justice Morgan was met with some opposition from landlords – not least BNP Paribas, of course – who were concerned with its implications.

Now, following an appeal to the ruling, normal service has been resumed through a decision by the Court of Appeal. Only last week, Lady Justice Arden ruled that it was not appropriate to imply a term into the lease that entitled the tenant to a refund of the rent it had paid in advance in accordance with the express terms of the lease.

In her judgment, she stated that the parties could easily have incorporated wording in the lease that required the landlord to repay any rent (or other charges) attributable to the period after the lease came to an end.

As such, the decision heralds a reinstatement of the widely held view that in the absence of an express provision, the tenant will not be entitled to a refund.

Much to the relief of landlords everywhere, a return to the norm means much less of a legal minefield.

Scott Cable is an Associate in the Dispute Resolution department at Sintons, and is aspecialist in property disputes. To speak to Scott about this, or any other matter, contact him on 0191 226 7806 or scott.cable@sintons.co.uk

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