This post was written by Katherine Campbell and Siobhan Hayes.
Do tenants who want to exercise a break part way through a quarter have to pay the whole quarter’s rent on the quarter day in order to validly exercise the break? You will know from our previous posting that there have been two cases in the last year that have examined this question.
If the break clause provides that the rent due under the lease has to be paid as a condition of validly exercising the break, (subject to specific lease provisions otherwise) the current legal position is that the rent payment cannot be apportioned to the break date. It must be paid for the full quarter even though part of that falls after the break,
The two cases that were to go to the Court of Appeal on the point in February PCE Investors v Cancer Research and Canonical UK v TST Millbank (one of which we litigated) have both settled, the landlords having succeeded first time round in the High Court.
For now, a tenant who pays the whole quarter’s rent in advance is left to negotiate with its landlord as to any reimbursement post break. Some leases provide for this, but many don’t and there is no settled law which requires the landlord to reimburse anything. The tenant who doesn’t pay the whole quarter up front however lays itself open to a claim that the lease hasn’t been broken at all, leaving it responsible on all of the lease covenants for the remainder of the term.
Those negotiating new leases for tenants know that they need to negotiate specific apportionment or refund wording in order to ensure that the tenant only pays for the time the lease exists.