Solicitor Gemma Smith, in our Commercial Property team, explains vacant possession.
Recent case law has demonstrated the importance of tenants complying with any required conditions on vacating their property, particularly following the exercise of a right to break, and the serious and potentially expensive consequences of failing to do so. If a tenant doesn’t properly comply with these conditions the lease will not terminate and the tenant will remain bound to the agreement. Focus has most recently been on the issue of vacant possession.
Vacant possession – what does it mean?
Put simply, vacant possession means that the property must be empty and free of people. For tenants, ensuring that the property is also free of chattels such as furniture, pictures and boxes is crucial. The important point to note here, as we will see below, is that vacant possession will not be given where there is an obstruction or impediment that might substantially interfere with the landlord’s right of enjoyment or right of possession of part, or whole, of the property.
Recent case law
The case of Riverside Park Ltd v NHS Property Services Ltd [2016] related to a dispute between a landlord and tenant over the exercise of a break clause in a lease which required the tenant to give vacant possession of the property on or before the break date.
The tenant had left demountable partitions in the property which the High Court held to be chattels, and not fixtures, because they were easily removable and were installed by the tenant for their own benefit and business need.
The Court ruled that the partitions substantially interfered with the landlord’s use of the property and the tenant has therefore failed to give vacant possession. As a result the break clause had not been exercised correctly and the lease continued to exist.
Similarly in Secretary of State for Communities and Local Government v South Essex College of Further and High Education [2016] the tenant vacated the premises after the serving of a break notice and left behind internal non-structural partitions, together with other chattels including a photocopier, computer screens and a reception desk. It is also worth pointing out that the tenant failed to return the key fobs to the landlord.
As far as the Court was concerned, and “to the outside world”, the tenant had not done anything to demonstrate that it had actually vacated the premises. In fact, the tenant’s actions were deemed to amount to abandonment, rather than yielding up the premises with vacant possession.
The Court held therefore that the tenant, particularly given it was storing items at the premises and in effect continuing to use the premises, had failed to give vacant possession and the lease continued leaving the tenant liable for paying the rent.
Summary
Both cases demonstrate the importance of a tenant vacating their property correctly and that a tenant’s obligation to give vacant possession may not be as straightforward as you might think. Careful drafting of the terms of the break may have avoided the problem and it is now quite common to include a condition requiring the tenant to give “possession free of any occupiers” as opposed to “vacant possession”. This is easier to comply with.
In light of the consequences for the tenants in these cases, tenants should carefully consider what must be done, well in advance of the break date, to ensure that they vacate the property correctly to effectively exercise the break. They are advised to obtain legal and surveyors advice at an early stage.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
