Break Clauses & Vacant Possession
The High Court in England & Wales recently ruled in the case of Riverside Park Limited –v- NHS Property Services Limited  EWHC 1313 that a tenant’s failure to remove demountable partitioning meant that vacant possession as a condition of the tenant’s break clause was not provided and the break was therefore not effectively exercised.
The lease in question contained a tenant’s break clause which allowed the tenant to terminate the lease provided that, inter alia, it gave “vacant possession of the premises to the landlord on or before [the break date]”. The court found that demountable partitioning was a chattel (not a fixture) which the tenant was therefore obliged to remove. Their failure to do so at the break date meant that vacant possession had not been given and the break clause was ineffective.
In his ruling Judge Saffman found that:
- The landlord does not have to prove that they cannot let the premises to anybody else to establish that the failure to provide vacant possession has compromised its enjoyment of the premises;
- The landlord’s enjoyment of the premises “encompasses having it in a condition in which it feels that it is a more attractive proposition to prospective lessees”;
- Citing Lewison J in Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd (2006) EWHC 1008 (Ch), “there is no room for general considerations of fairness or conduct” when assessing whether the conditions attached to the valid exercise of a break clause had been met.
Landlords seeking to challenge the exercise of a break clause will be reminded by this decision that they should scrutinise the treatment of alterations and additions and not only the more common grounds of opposition such as outstanding payments due under the lease, subsisting breaches and validity of the break notice.
For tenants, this decision will be a reminder that all conditions to a right to break must be strictly performed if it is to withstand a Landlord’s challenge.
Please contact a member of our Real Estate Department for further advice or information.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.