In our July 2012 Property Update we identified some of the difficulties tenants experience when exercising a break clause.
A recent case, at long last, seems to give tenants some good news.
It is now established law that if the lease requires the tenant to pay the rent up to the break date, then in the absence of express wording to the contrary, the tenant must have paid the full quarter’s rent on the quarter day before the break date in order to satisfy this condition. So, if the break date is 24 July, the tenant must pay rent from 24 June to 28 September in order to satisfy the condition. If the tenant only paid rent from 24 June to 24 July the condition would not be satisfied and the lease would continue.
In a recent case the Court has implied a term into the lease to the effect that if the lease is broken in such circumstances the landlord is required to refund the rent for the period after the break date. So, using the example above, the tenant would be entitled to a refund for the period from 25 July to 28 September. In our experience, most landlords have (reluctantly) done this anyway but this case is useful clarification on the point.
There is, however, one slightly unusual fact in this case which could have had a bearing on the Court’s decision. This was that in order to successfully break the tenant had to have paid the rent up to the break date and also had to pay one year’s rent as a break fee. The Court said no reasonable person could have expected the tenant to have had to pay a break fee and also to have been “obliged” to donate to the landlord rent for the period after the break date. No doubt a Court at a later date will tell us how significant the break fee was in determining the outcome of this particular case but, for the time being, it is welcome news for tenants.