You are an occupier of commercial premises with a lease which requires rent of £190,000 per annum to be paid quarterly in equal installments in advance on the usual quarter-days (25 March, 24 June, 29 September and 25 December ). You have a clause in your lease entitling you to bring it to an end by giving 6 months’ notice in writing to your landlord ending on 11 October 2011 (“the termination date”). The break will take effect provided that you have paid the rent in full “up to the termination date” and provided that you give vacant possession of the property to the landlord on 11 October 2011.
How much rent do you need to pay on 29 September 2011? You might think that you have to pay £6,767.12. That is the amount of rent that covers the period of 13 days between 29 September 2011 to 11 October 2011: (£190,000 / 365 days) x 13. That certainly seems logical because the break clause requires the rent to be paid “up to the termination date” and because it surely cannot have been intended that you have to pay rent for any time after the lease has come to an end on 11 October 2011.
Unfortunately for you that is not the right answer. The right answer is that the lease contains an obligation to pay a quarter year’s rent, that is to say £47,500, on each quarter day, so that is the amount that you should have paid on 29 September 2011. The reference to paying the rent due “up to the termination date” is actually a requirement to pay all the rent that is liable to be paid up to that date.
This scenario is a very common one and it never ceases to surprise commercial occupiers of property the first time they come across it. It never ceases to aggravate them either because in reality they are having to pay an amount of rent for a period of time after the lease has come to an end.
Not unnaturally I often get asked whether it is possible to challenge this in Court. My answer is no, because the law is very clearly on the landlord’s side on this issue. Nevertheless a tenant has recently tried to challenge this point in the case of PCE Investors Limited -v- Cancer Research UK and got badly burned in the process.
Having paid a lesser amount of rent for the period 29 September to 12 October, it has found that, in trying to save about £39,712.33, it has made itself liable for the full rent of £190,000 per annum plus all the other associated charges under the lease for the remainder of the contractual term to 27 September 2014, the Judge having ruled that its break notice was invalidated by its failure to pay the correct figure by the termination date. Its total liability for failing to get it right is likely to be more than £517,000 in extra rent to September 2014 and probably the landlord’s costs of the action.