PCE Investors Limited v. Cancer Research UK
What is the issue?
It will be a condition of virtually every tenant's break option in a Lease that the tenant has paid the rents reserved and demanded by the Lease up to the break date. Rent is generally payable in advance by equal quarterly payments on the usual quarter days. A common question if the break date falls during a rent quarter is whether effective exercise of the break option requires payment of the full quarter's rent or an apportioned sum for the period to the break date.
And the facts...
PCE, as tenant, had the benefit of a break option. The break was conditional upon PCE paying the rents reserved and demanded by its Lease up to the break date. The rent reserved by the Lease was payable "by equal quarterly payments in advance on the usual quarter days in every year". The break date was 11th October 2010. On the 29th September 2010 while the Lease was clearly still subsisting the obligation fell on PCE to pay the September quarter rent. The September quarter covered the period to 25th December 2010. PCE tendered rent to the 11th October 2010 only.
What is the law?
It was held that PCE had not successfully exercised the break option. The full quarter's rent fell due on the September quarter day. It was payable in advance and on that day it could not be certain that the Lease would determine on the break date. The Court could not accept, as a matter of construction, that the clear obligation on the 29th September 2010 to pay a full quarter's rent could somehow be retrospectively reduced because an event after that date operated to terminate the Lease.
What does this mean in practice?
Where it is a condition of a tenant's break option that rents reserved and demanded by a Lease are paid up to the break date and the break date falls during a rental quarter the tenant, looking to operate a break option, must pay the full rent for that quarter. There can be no subsequent claim for an over payment. If the rent were to be apportioned upon the termination of the Lease it would require clear wording in the rent payment provision or in the break clause itself.
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