Break Clauses and Refunds in Commercial Property Leases: Update

The Court of Appeal recently provided guidance in Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another (2013) in relation to the operation of break clauses and refunds of rent paid in advance beyond a break date.

The facts of the case were that the tenant, following the exercise of their break clause, was claiming a refund for payments made in advance for rent, despite no express provisions in the lease allowing for a refund of rent paid in advance beyond the break.

The tenant maintained that the lease implied a clause that entitled them to a refund and that the phrasing in the lease that they should pay rent ‘proportionately for any part of a year’ implied that rent would not be payable for the period after the break date.

In making their decision, the Court of Appeal referred to the judgment in Attorney General of the Belize and others v Belize Telecom Ltd (2009) that established the test to ascertain whether an implied clause can be inserted into a contract. The general rule is that if the parties have not indicated that they wish a clause to be included, then it should not be included. However, should a reasonable person understand that the parties meant something other than what has been expressly written, and provided that the implied would be consistent with the other provisions, then the Court will imply a term. Phrases such as ‘goes without saying’, and ‘necessary to give business efficacy to the contract’ have been used to explain this exception to the general rule.

In Marks and Spencer v BNP Paribas, the Court of Appeal held that, on the facts of the case and given the absence of provisions for return payments in the break clause, the requirements of the Attorney General of the Belize test meant that there was to be no clause implied into the lease relating to refunds of rent paid in advance.

To many this decision appears to be a restoration of the widely-accepted view that, without express provisions, tenants cannot claim refunds for rent paid in advance for the period following a lease coming to an end pursuant to a break clause.

When negotiating the terms of a lease with a break clause, tenants’ solicitors should ensure that:

• The break date is the last day of a rent period, and,
• The lease expressly provides for a repayment of rent and any other payments from the break date to the next payment date.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact Andrew Nicklinson at or Paul Jagger at