In the current market, disputes over break clauses are rife. The recent High Court decision in Marks and Spencer plc v BNP Paribas Securities offers potentially positive news for tenants.
Prior to this case, if a tenant break clause is conditional on there being no arrears of rent and the break date falls mid-quarter or on a quarter date, the usual advice would be that the tenant should pay the full quarter's rent, service charge and so on (in addition to ensuring that no other arrears are outstanding under the lease). However, it was thought to be unlikely that the tenant was then entitled to a refund of the overpayment from the landlord even if the lease was broken.
This recent case gives hope to tenants in this difficult situation as the Court held that the landlord must refund the overpayment to the tenant. Of course this finding is limited to the specific facts of the case, which included a one-off break payment and specific wording in the lease. But it does suggest a possible change in judicial attitudes and, at the very least, gives tenants an argument to use. The case is likely to be appealed and we will keep you updated.