Break clauses in leases important Supreme Court judgment

Landlords will breathe a sigh of relief following a Supreme Court decision. The court ruled that it was not appropriate to imply a term into a lease that entitled a tenant to a refund of the rent, car parking licence fee and insurance charges that it had paid in advance in accordance with the express terms of the lease.

In this case, the tenant had exercised a break clause, ending the lease early. The tenant sought a refund of parts of payments it had made in advance in respect of rent, service charge, car parking licence fee and insurance charges relating to the period after the break date (the issue of the repayment of the service charge had been settled during High Court proceedings).

When negotiating a lease for a tenant that contains a break clause, tenants’ lawyers should advise their clients that they should seek a refund of rent and any other payments for the period from and excluding the break date up to and excluding the next rent payment date. If an express clause is not included in the lease, the tenant will not be entitled to a refund.