The Court of Appeal refused to imply a term into a lease that would enable a tenant to a refund of rent paid in advance and which related to a period after the break date. This was despite the fact that the tenant had paid a break premium equivalent to approximately one year’s rent. Mathew Ditchburn and Paul Tonkin report on the facts of the case1.

Marks & Spencer was the tenant under four leases of separate floors of an office block in Paddington. All the leases were on the same material terms so the Court considered just one of them. The lease required rent to be paid on the usual quarter days in advance. The lease contained a tenant’s break option which was conditional upon M&S paying a break premium and also having paid the rent in full. M&S successfully exercised the break clause and terminated the lease. It then sought to reclaim the rent and other sums paid in advance for the period after the break date. The landlord refused, arguing that there was no express term entitling the tenant to a refund. 

In the High Court, the Judge found in favour of M&S and implied a term into the lease allowing for the excess rent to be returned to M&S. The Judge considered that, as M&S had already paid the break premium, the parties could not have intended that the landlord should keep the overpayment of rent as well. 

The Court of Appeal disagreed. If the parties had intended the rent to be refunded, they would have included an express term in the lease to this effect. In the absence of an express clause, the rent paid would lay where it fell: namely, in the pocket of the landlord. 

The Court supported the view (agreed by the parties) that advance service charge payments should be refunded where they relate to services not yet provided by the break date. However, the Court refused to apply the same argument to rent, holding that rent could not be viewed in the same way.