Archive for June, 2013

Apportioned or not?

Leases of commercial premises commonly state that the tenant shall pay rent by instalments due quarterly in advance on the usual quarter days i.e. in England and Wales: 25 March (Lady Day), 24 June (Midsummer Day), 29 September (Michaelmas) and 25 December (Christmas).

The specified date for the termination of a lease can be in the middle of a quarter but the tenant is required to pay a full quarter’s rent on the previous quarter day.  When the lease ends, is the tenant entitled to a repayment of the rent paid apportioned according to the days falling due after the termiantion date?  Some lease clarify the issue but others do not.

The question was highly relevant in the reported case Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another [2013] EWHC 1279 (Ch).  The lease was stated to terminate on 2 February 2018 but the tenant had the benefit of a break clause which, if exercised, could determine the lease on either 24 January 2012 or 24 January 2016.  The option to determine was conditional upon first, there being no rent arreats as at 24 January 2012 or 2016 and secondly, that the tenant paid to the landlord on or prior to 24 January 2012 the additional sum of £919,800 plus VAT.  The tenant exercised the break as at 24 January 2012 having paid rent including that due Christmas 2011 and the additional sum.

The court was asked to determine whether the tenant was to be re-imbursed for the rental paid at Christmas 2011 for the period beyond 24 January 2012.  Mr Justice Morgan analysed the case law presented by the parties and concluded that the tenant was entitled to be repaid the relevant sum.  It is important to note, however, that the judge appears strongly influenced by the fact that the lease stated that the rent should be “paid yearly and proportionately for any part of a year by equal quarterly instalments in advance on the Quarter days“.  The question must remain at large as to what would happen if those words were not present?

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