The Court of Appeal has ruled that a commercial tenant was not entitled to a refund of prepaid sums after exercising a release clause.

The tenant had a commercial lease which was due to expire in 2018. The terms included a break clause that offered the tenant the option of terminating the lease in either January 2012 or January 2016.

The tenant exercised the clause at the first opportunity and paid the basic rent for the whole quarter.

The lease ended on 24 January 2012 and the tenant demanded a refund on the rent it had already paid, from 25 January to 24 March 2012. The tenant claimed that it was implied in the terms of the lease that it would receive a refund for sums paid in advance if it exercised the break clause before the lease ended.

The landlord refused to pay so the tenant took legal action.

The High Court ruled that the tenant was entitled to a refund as it was implied in the terms of the lease.

However, the Court of Appeal overturned that decision. It pointed out that it would have been possible to envisage this situation at the time the lease was drawn up yet neither party had felt it necessary to stipulate that a refund would apply.

From the wording of the lease, there was no basis for implying a repayment of rent and other charges for the period following the break and therefore the client wasn’t entitled to a refund.

Please contact us at dispute@berrysmith.com for more information about the issues raised in this article.