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Give me a break! Vacant possession and lease break options

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Give me a break! Vacant possession and lease break options

Give me a break! Vacant possession and lease break options

A tenant’s ability to exercise its option to break the term of a lease was recently considered by the High Court in the case of Riverside Park Ltd v NHS Property Services Ltd.

The judgement has emphasised how alterations to a property can complicate the position of vacant possession, showing that compliance with break provisions is not necessarily straightforward.

The facts

NHS Property Services Ltd (‘NHS’) had been assigned a 10 year lease which contained a break clause exercisable on the fifth anniversary of the term. The break was dependant on two requirements; to give six months’ notice and to give Riverside Park Ltd (‘Riverside’) vacant possession by the break date. NHS left the property by the break date but had left behind partitioning it had installed at the property which they had failed to remove by the break date. The dispute was whether the requirement to give vacant possession had been fulfilled, given the partitioning remained in the property.

One of the key issues to determine was what items constituted either ‘chattels’ or ‘fixtures’. Riverside claimed that NHS had not given vacant possession as the partitions were chattels. The High Court agreed with Riverside for the following reasons:

  • the layout of the partitioning was in the NHS style and wasn’t what other tenants wanted;
  • the partitions were not fixed to the structure but were instead affixed to the floor and ceiling by screw fittings; and
  • the partitions interfered with Riverside’s right of possession.

It was found that when taking back the property, Riverside found the property was not in a lettable condition as far as they were concerned. The break was therefore found to be ineffective and NHS was held liable to pay the remaining five years’ rent.

Conclusion

If works have been carried out during a lease it is vital to consider the documentation for the works in addition to the lease provisions. When exercising a break, tenants should think carefully not just about vacating the property, but also what alterations have been made and how they will need to be dealt with when they vacate!

For more confirmation contact our Real Estate team on 0345 070 6000.