Supreme Court case considering the effect of a break clause contained in sub-underleases of different floors of a building known as “The Point” in London.
M&S let the property from BNP and the rent was paid quarterly in advance. When M&S exercised the break clause, the lease came to an end on 24 January 2012. M&S then brought a claim for return of the apportioned rent in respect of the period from 25 January 2012 to 24 March 2012.
There was no express term in the lease which entitled the tenant to repayment of the rent. However, M&S argued that a term should be implied into the lease.
The Supreme Court dismissed M&S’s appeal.
The Court confirmed that a term will only be implied into a contract if it satisfies the case of business necessity or is so obvious that it goes without saying. It was noted that, although rent payable in arrears is apportionable under the Apportionment Act 1870, the 1870 Act does not apply to rent payable in advance and that common law authorities do not provide for rent (whether paid in arrears or advance) to be apportioned. The court then reached the conclusion that (aside from in very exceptional circumstances) an express term would require to be included in the lease to entitle a tenant to a refund of rent paid in advance.
Lord Neuberger said the following:
“Save in a very clear case indeed, 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, when the non-apportionability of such rent has been so long and clearly established. Given that it is so clear that the effect of the caselaw is that rent payable and paid in advance can be retained by the landlord, save in very exceptional circumstances (eg where the contract could not work or would lead to an absurdity) express words would be needed before it would be right to imply a term to the contrary.”
The full judgement is available from the Supreme Court here.
