Rent apportionment clauses and implied terms: implications of Supreme Court decision for tenants and landlords

Written on 2 Dec 2015

The Supreme Court has confirmed that, in the absence of an express provision, a court should not imply into a lease a term to enable apportionment of rent paid in advance for the period after the break date where the break date falls between quarter days. When invited to imply a term that would result in the rent after the break date being repaid, the court decided that, where the lease is a full and carefully considered contract, the proposed implied term did not pass the test of being necessary to give business efficacy to the contract.

What does this mean for tenants? Tenants looking to exercise break options in current leases without apportionment clauses will need to pay the full amount due before the break date to ensure the break is properly exercised and should not expect to receive back any overpayment. When negotiating new leases, express apportionment clauses are a must have.

What does this mean for landlords? The decision is good news for landlords who get to keep any payments of rent referable to the period after the break date. However, when negotiating a new break clause from now on, it is likely to be unreasonable to refuse a tenant a request for a rent apportionment clause.