Break Notices in Commercial Leases
Break clauses are very often subject to conditions and tenants need to be aware that any conditions must be strictly complied with in order to ensure the successful operation of a break. Tenants need to be alert to the fact that such conditions might include payment of rent which relates to a period after the break date.
Case law on break clauses has in recent years produced some harsh decisions for tenants, including the decision of the Court of Appeal in Marks & Spencer PLC v BNP Paribas  EWCA Civ 603 in which it was established that in the absence of an express provision in the lease, a tenant will not be entitled to a refund of any overpayment of rent relating to a period after the break date and no such term should be implied into the lease requiring the repayment of “overpaid rent”.
Yesterday, the Supreme Court handed down it’s judgment dismissing Marks & Spencer’s appeal for repayment of “overpaid rent” following the exercise of a break clause in its lease.
The Supreme Court decision clarifies the law on apportionment of rent and implied contractual terms.
- The Apportionment Act 1870 does not apply to rents payable in advance;
- The position on break clauses mirrors the law on forfeiture, where a landlord who forfeits a lease under which rent is payable in advance, is, in the absence of any express clause to the contrary, entitled to the payment of the whole of the rent which falls due before the lease is determined by forfeiture, although the rent may cover a period after the forfeiture.
- A term will only be implied into a detailed commercial contract where it is necessary to give business efficacy to the contract and the “business necessity” test is met, or in circumstances where the law (by statue or common law) imposes certain terms into certain classes of relationship.
- The Court will not interfere in a bargain struck between the parties to a detailed commercial contract and a term will therefore not be implied:-
- merely because it seems fair to imply such term; or because,
- in hindsight, the parties would have agreed such term had it been suggested to them at the time of negotiating the contract.
- An express term is required to apportion rent payable in advance.
Any tenant seeking to exercise a break clause or negotiating a new lease which is to include a break option would be well advised to seek legal advice at an early stage. Our property team has extensive experience in acting for commercial tenants and can provide advice and guidance on all landlord & tenant issues. For more information or to discuss a particular issue please contact Penni Gibbs.
- Acting for both land owners and property developers in relation to both residential and commercial development projects.
- Advising on the structure and content of the legal documentation associated with the sale and acquisition of development sites.
- Negotiating section 106 planning agreements.
- Negotiation of option agreements and conditional planning agreements.
- Plot sales / disposals.
Landlord and Tenant
- Advising both landlords and tenants in relation to the taking of and the grant of commercial leases of all form of commercial property.
- Dealing with subleases of commercial premises.
- Dealing with ancillary leasehold documentation such as licences to alter, change of use or licence to sublet.
- Advising in relation to variations of leases.
- Advising in relation to agreements for leases including development obligations.
Real Estate Finance
- Acting for both lenders and borrowers in relation to the taking and granting of security over all forms of commercial property.
- Acting and advising borrowers in relation to obligations in standard security documentation issued by both corporate and individual lenders.
- Perfecting a lenders security over the property at the Land Registry and Companies House.
- Dealing with commercial remortgages.
- Dealing with variations to existing security or substituted security.
- Acting for liquidators, administrators in bankruptcy in the sale of all forms of commercial property.
- Acting on and dealing with the sale of property under the Proceeds of Crime Act.
- Acting for buyers of commercial property from liquidators, administrators and trustees in bankruptcy.
- Acting for sellers and buyers of all forms of commercial investment property.
- Advising on the due diligence to be undertaken in connection with the acquisition of investment premises.
- Advising in relation to the VAT and TUPE implications arising out of an investment transaction.
- Advising buyers in relation to their ongoing liabilities under the individual leases.
- Advising on the property aspects arising out of the sale and purchase of businesses.
- Advising on the nature and extent of property warranties included within the legal documentation.
- Advising and dealing with obtaining the necessary consents for the transfer of any leasehold premises as part of the corporate transaction.
Property related Pension Schemes
- Acting for pension providers and individuals in relation to property related pension scheme arrangements.
- Advising pension companies in relation to the legal structure of property related schemes.
- Carrying out appropriate due diligence in relation to the property aspects of a pension scheme.
- Advising on and dealing with issues arising out of the transfer of assets from one pension fund to another.
Sales and Acquisition of Commercial Property
- Acting for sellers and buyers in relation to the sale and acquisition of all forms of commercial property
“Our projects are often opportunities that arise where there are legal complications and/or the matters are time sensitive. Sometimes we take on projects where others have tried and failed.
“We use Julian De Giovanni because we have found him adept at identifying problems early on and then either resolving them or advising us of our position. He always has in mind the importance to us of being able to sell on completed units quickly and cleanly once we have concluded a project.
“This was a project where there was a lot to be done in a short space of time. Nevertheless the job was still carried out to the same standard as if time were no object.
“Julian puts in the extra effort that is required to get the job done. He is contactable, answers the phone and replies to messages. He meets and exceeds our expectations whilst remaining a pleasant person to deal with! I have had no hesitation in recommending him to others.”
SLC Property LTD”
Property Development Company
“I felt that Julian De Giovanni kept on top of this transaction and ensured that I was regularly updated. This was the first time that we had instructed Julian but won’t be the last.”
Wallop Defence Systems”
Defence Technology Company