Breaking up Is Hard to Do

Andrew Oranjuik

Andrew Oranjuik

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Businesses who sign up for a commercial lease have been warned to check the small print before they sign on the dotted line.

Andrew Oranjuik, Head of Commercial Litigation at Martin-Kaye, says "It's vital that commercial tenants should negotiate the terms and conditions of their lease before signing up as otherwise it could cost them dearly."

The issue has been brought into sharp focus following a case in the Supreme Court between Marks & Spencer and BNP Paribas, when M&S triggered a break clause in their lease. Their yearly rent on a store in Paddington was £919, 800, and it was payable in quarterly instalments in advance.

They gave notice that they wanted to end their lease early, as they were permitted to do, but had made a rent payment that covered a period of time after they no longer occupied the premises – so they claimed a refund. But there was no provision in the lease that meant the landlord was obliged to give them back the overpayment, even though it would have seemed to be the most ethical thing to do.

The Supreme Court agreed, ruling that the landlord was entitled to keep all the rent.

Andrew said "If there had been a clause included in the lease that required a refund, it was likely that the case would never have even gone to court. This ruling shows that if tenants want to protect themselves and their business, they need to negotiate their rights at the very start of a lease before they sign. Ultimately, without this provision being made in the initial paperwork, it’s very unlikely that the courts will rule in the tenant’s favour, and the business could also find itself severely out of pocket.”

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