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Archive for December, 2015

Law remains as was re apportionment of rent

Last month, we looked at two cases heard by the Supreme Court.  That court has now produced a further much talked about issue - the apportionment of rent if a break clause is exercised between rental payment dates.

In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and anor [2015] UKSC 36, the tenant exercised the break terminating the lease on 24th January 2012.  Rental payments fell due to be paid in advance on the usual quarter days (including 25th December and 25th March).  The break only took effect if specified conditions were met one being that there were to be no rental arrears as at the termination date.  In consequence, the tenant paid all rental sums due on 25th December 2011.

It is an established principle of common law that whether rent is payable in arrear or in advance, it is not apportioned according to time.  However, the Apportionment Act 1870 provides that all rent accrues from day to day.  Whilst the courts have held the Act applies to rent payable in arrear, the Court of Appeal held as long ago as 1900 that the Act does not apply to rent payable in advance.  Knowing this, the tenant paid the full payments due on the December quarter day.  The Supreme Colurt confirmed that the law re apportionment of rent was correct.  Nevertheless, the question before the court was whether or not, having paid a full quarter’s rent prior to the break date, a term should be implied into the lease enabling the tenant to recover from the landlord the payments made for the period of time between the termination date and the next usual quarter day (25th March 2012).  The sums involved were substantial.

The judge at first instance, Sir Paul Morgan, had found in favour of Marks and Spencer.  However, the Court of Appeal disagreed and refused to imply a lease term enabling the tenant to reclaim rental paid for the period of time after the termination of the lease on 24th January 2012.  Marks and Spencer appealed but the Supreme Court dismissed the appeal.

The decision has been criticised by some commentators but the law remains as was.