A tenant who exercised a break clause was not able to recover rent already paid for the period after the break date, where there was no express right to a rent refund.

The Court of Appeal has reversed a decision which implied a term into a lease requiring the landlord to refund the tenant for rent payments relating to “the broken period” i.e. the period after the break date.  M&S, as tenant, had the benefit of a break option which they exercised which included paying the break premium sum to their landlord, BNP, equivalent to one year’s rent.  The break was also conditional on there being no rent arrears and therefore sensibly M&S also paid a full quarter’s rent, part of which related to the period after the break date.  After the lease terminated, M&S sought to recover the “overpayment”.

Marking a departure from previous authorities, the High Court had held that there was an implied term in the lease that the tenant was entitled to a refund, as this was a “reasonable term” and “obviously what the parties meant”.

The Court of Appeal took a different view, and held that the lease, read as a whole against the relevant background, would not reasonably be understood to include such a term for a refund and the test for such a term to be implied had not been met. The court was persuaded that it would have been obvious to the parties to the lease when signing it that there was a possibility that the whole quarters’ rent would need to be paid on the break date, and despite this the parties had proceeded with completing the lease on the basis that the loss from a payment of the rent for the broken period should lie where it fell.

This confirms the widely accepted rule, that without express provision in a lease to the contrary, a tenant will not be entitled to a refund of any rent paid that relates to a period after a break date.

Marks and Spencer PLC –v- BNP Paribas Securities Services Trust Company (Jersey) Limited & Anr [2014] EWCA Civ 603.