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20-01-2016

Previously we looked at the practical issues to consider when exercising a break clause in a commercial lease (seeĀ here). The recent case of Marks & Spencer v BNP Paribas is important for both landlords and tenants.

The case confirmed that, where a tenant is required to pay any sums in advance as a condition of exercising its break (such as rent, service charge or insurance rent), the tenant will not be entitled to a refund of those sums, unless there is an express clause in the lease to the contrary. If there is no such refund clause in the lease, the courts will not look to help the tenant out, even if that seems unfair to the tenant.

This is clearly good news for landlords and means that they can rely on the certainty of the lease terms which they originally negotiated with their tenants and not be worried about the court implying any new terms. It also means that landlords can keep any overpayments of rent made by their tenants without fear of clawback.

Tenants will wish to negotiate express provisions entitling them to a refund of any overpayments when they come to break their lease. However, landlords in strong bargaining positions are likely to resist so this is something which tenants will need to factor into their budget when calculating the cost of breaking their lease.

This briefing is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained here.

TESTIMONIALS

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