M&S loses landmark property case in Supreme Court (December 2015)

Many tenants would consider that it is fair that a Landlord should refund rent paid in advance after a break date in a lease, however this was not the case in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another and another (“BNP Paribas”).

M&S leased a premises known as The Point in London Paddington, from PNB Paribas. The lease required M&S to pay a yearly rent in advance on the usual quarter days (25 March, 24 June, 29 September and 25 December). In 2011 M&S exercised a break clause in their lease, bringing it to an end on 24 January 2012. On 25 December 2011, pursuant to the lease, M&S paid the rent that fell due in full up to the next quarter payment in March, even though the lease was to end approximately one month later.

When the lease ended, M&S claimed a refund of &1.1million being an apportionment of the rent from 24 January 2012 when the lease ended to 24 March 2012 when the next quarterly payment became due.

It was held by the Supreme Court that it was wrong to imply a term into the lease that the rent payable in advance would be apportioned when the break clause was exercised. Lord Neuberger provided the lead Judgment in the case and stated it would be wrong to attribute to a landlord and a tenant, particularly when they have entered into a full and professionally drafted lease, an intention that the tenant should receive an apportioned part of the rent payable and paid in advance.

This case has highlighted the importance for tenants to ensure that their lease contains an express term that, where a break clause is conditional on all rent being paid, there is an obligation on the landlord to apportion and refund to the tenant any rent paid in advance plus any VAT. Alternatively, the lease should be drafted so that the break date is the last day in the quarter.