Landlord ordered to repay apportioned rent after break date

A landlord has been ordered to repay an apportioned amount of rent and other sums paid by a tenant in advance under a pre-condition to a break option. The tenant had served a break notice, to bring the lease to an end mid-quarter. There was no express clause in the lease requiring the landlord to return the money. The court implied a term into the lease obliging the landlord to refund apportioned sums paid in advance, but which related to a period after the break date.

The decision is a significant and tenant-friendly landmark. Tenants will confidently demand refunds from landlords for sums paid in advance following determination of a lease under a break option. By implying a repayment obligation, and pending any appeal, the decision shifts the burden to the landlord to distinguish this case and prove that sums paid in advance may be retained. 

To avoid uncertainty, parties to a lease should specifically agree how rent and other payments made in advance should be treated after the exercise of a break option. This case does not overrule current authority that a tenant must pay the full quarter’s rent to successfully operate a break option if the option requires payment of all sums due “up to” the break date. However, the case does open the door to a further court challenge on the point…

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