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Ruth Ellway  

Associate, Dispute Resolution

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Marks & Spencer case could change the tenancy landscape says lawyer

 

Article date:  08/07/2013

A leading Midlands law firm says a major new High Court ruling has highlighted the need for calling in expert advice over tenancy agreements.

Ruth Ellway, a specialist property litigation lawyer at Midlands law firm Higgs & Sons, said the recent ruling involving retail giant Marks and Spencer could have widespread implications for landlords and tenants.

Ruth said under the ruling Marks & Spencer won the right to have its overpaid rent reimbursed after it exercised a break clause in various leases of one of its properties mid quarter.

Previously the company could have expected to have paid rent for the entire quarter without any expectation of receiving any refund for overpayment.

Ruth said the new ruling indicated a shift in the law, though the situation was still not fully clear.

"Prior to this new ruling, tenants have been unsuccessful in recouping any overpaid rent covering the period after the break date. However, this decision may have changed that position and as such could have wide implications.

"As such, it is vital that anybody operating a break option seeks the best possible legal advice."

The High Court ruling that Marks & Spencer should be repaid its overpaid rent for the period after the break was a departure from previous judgements.

"As the lease terms were silent the court ruled a term should be implied requiring reimbursement of the overpaid rent as it considered it was reasonable to do so and in order to give business efficacy to the lease," explained Ruth.

"Also, the Court decided that because the break was conditional upon payment of a lump sum thereby compensating the landlord for the loss of its income stream, it was unlikely the parties would have intended to allow the landlord to retain any overpaid rent."

She said the court also ruled that as it was clear that as the break date fell between quarter days, a reasonable person would expect payment of rent to be apportioned.

"Whilst the decision may give some comfort to tenants to pay and apportion rent to a break date where a break premium is payable, the position is by no means clear," she added.

Higgs & Sons works from two offices in the Black Country - Waterfront Business Park in Brierley Hill and Kingswinford. The firm employs more than 200 people, which includes over 100 specialist lawyers.

For specialist advice for your business relating to property issues, contact Ruth Ellway on 0845 111 5050 or email ruth.ellway@higgsandsons.co.uk

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