Must a landlord account to his tenant for rent paid in advance under the lease if the lease comes to an end within the period to which the rent relates ?

February 22, 2016

No, said the Supreme Court in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015] UKSC 72.

M & S had given notice to break its lease in accordance with its terms and paid the rent which fell due on the preceding quarter day so it could not be said that it was in breach of its lease at the time it came to break. After the lease had been safely terminated, M & S sued for the recovery of the rent paid in advance which related to the period after the lease had come to an end.

 It contended principally, as Morgan J found at first instance, that a term should be implied into the lease to that effect.

 The Supreme Court’s decision upholds the existing understanding of the law as set out in Ellis v Rowbotham[1900] 1 QB 740 and Capital and City Holdings Ltd v Dean Warburg Ltd (1988) 58 P & CR 346 on the basis that:

“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.”

This has long been a trap for the unwary and it will continue to be so.

The decision may be of most interest for the comments of Lord Neuberger upon the decision of Lord Hoffman on behalf of the Privy Council in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 in which, building upon his decision in Chartbrook v Persimmon Homes Ltd[2009] UKHL 38, he held that the implication of a term into a contract was simply a part of the exercise of construction. Lord Neuberger pointed out that this statement could be said to be inconsistent with the long established position that the test for the implication of a term is one of necessity. “In those circumstances,” he said, “the right course for us to take is to say that [Lord Hoffman’s] observations [in Belize Telecom] should henceforth be treated as a characteristically inspired discussion rather than authoritative guidance on the law of implied terms.”

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