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Break Clauses in Leases

Now that the dust has started to settle after the Supreme Courts’ recent decision in the case of Marks & Spencer vs. BNP Parabis, it is a time for reflection for both Landlords and Tenants.

Many of you will have read our previous summary of the case, but in short the case held that unless a lease expressly states a right to refund, then where a Tenant is required to pay rent to a particular date, regardless of when the break falls, they will not be entitled to a refund for any period from the break date to the next rent payment date.

Landlords will have been pleased with the decision in the Marks & Spencer’s case, whereas for Tenants, it reiterated the importance of seeking legal advice before entering into leases, in order to ensure they fully understand the terms that they sign up to. The notion of a break clause can be far different to the actual reality and the ins and outs of the intricacies of legal drafting. However, the case serves not only as a reminder to seek advice and understand terms of the lease at the outset but should also be a prompt for both Landlords and Tenants to review their existing leases.

For a Landlord and Tenant, on any new lease, the Marks and Spencer’s case will help when negotiating the conditions of the break clause and the issue of rent apportionments. However, where there is an existing lease in place the case could materially alter how each party had thought a break clause may work. Tenants may have been strategically planning to exercise a break and the outcome of this case may now make that financially less attractive or at the very least, require further financial and strategic planning.

It would be wise for both Landlords and Tenants to review all of their existing leases and break clauses and to review their strategy going forward.
Our Legal-500 recognised Commercial Property Team, led by Partner Tom Warrender, are on hand to help you review your existing lease, or act for you on any new lease so as to ensure you fully understand how the mechanics of the break clause (and the full lease terms for that matter!) will work.

Inevitably, as the Marks & Spencer case shows, there will unfortunately be times where a break or other lease terms are disputed. When that situation arises, Wilson Browne’s Commercial Litigation Team led by Partner Kevin Rogers are able to assist.

Whether you are Landlord or Tenant, our expert teams at Wilson Browne Solicitors are here to help you.

For further advice please contact our Specialist Commercial Property Team