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6th November 2020

Please Release Me – the Requirement to give up Vacant Possession in Conditional Break Clauses

By Kate Andrews & David Gregory

Capitol Park Leeds Plc v Global Radio Services [2020] EWHC 2750.

In this recent case, the High Court found the tenant had not complied with the conditions of a break clause which required it to give vacant possession of the premises. The tenant had removed the landlord’s fixtures and accordingly had not given back the premises as defined by the lease.

Facts

Pursuant to a lease dated 4 March 2002 (“the Lease”) Global Radio Services (“the Tenant”) was the tenant of the premises known as 1 Sterling Court, Capitol Park, Topcliffe Lane, Tingley, Leeds (“the Premises”).

The Lease contained a tenant’s break option at clause 10.1 which further stipulated at clause 10.1.4 that the entitlement to break was conditional on the Tenant giving “vacant possession of the Premises to the Landlord on the relevant Tenant’s Break Date”.

The Premises were defined in the Lease as follows:

“Premises” means the property known as 1 Sterling Court, Capitol Park, Topcliffe Lane, Tingley, Leeds, shown for the purposes of identification only edged red on the plan, including the air space lying above the existing roof of the building but including all fixtures and fittings at the Premises whenever fixed, except those which are generally regarded as tenant’s or trade fixtures and fittings, and all additions and improvements made to the Premises and any outside parts and any signage erected by or on behalf of the Tenant upon the estate and references to the Premises include any part of it.” (emphasis added)

On 15 February 2017, Global purported to exercise the break clause by giving written notice to the landlord, Capitol Park Leeds Plc (“the Landlord”) under clause 10.1, to terminate the Lease. On or around 12 November 2017, the Tenant returned the keys to the Premises to the Landlord.

It was agreed between the parties that the Tenant had stripped out various features of the Premises and/or fixtures including items such as ceiling tiles, window sills, radiators and ventilation duct work, leaving a shell of a building.

The Landlord’s Claim

The Landlord’s case was that in returning the Premises on 12 November 2017, minus those elements and/or fixtures which had been stripped out, the Tenant was not complying with the condition of clause 10.1.4 of the Lease to “give vacant possession of the Premises”. The Landlord sought a declaration that the Lease continued until its termination date in 2025.

The Tenant disagreed on the basis it had handed back the Premises free of people, chattels and other interests. In addition, the Tenant alleged an agreement had been reached at a meeting between the parties’ agents which estopped the Landlord from relying on the purported failure to give vacant possession of the Premises.

The Issue

The issue before the court was whether the Tenant had complied with clause 10.1.4 of the Lease.  This required the Court to consider the wealth of previous case law on the meaning of vacant possession.

It was a question of fact as to whether the condition in the Lease had been complied with based on the principle in Cumberland Consolidated Holdings Ltd v Ireland and Legal & General Assurance Society Limited v Expeditors International UK Limited that the Premises must not contain a substantial impediment to the Landlord’s use of the Property, or a substantial part of it.

Decision

Firstly, the Tenant’s estoppel argument was dismissed on the basis that no agreement had been reached between the parties and so there could be no estoppel.

Secondly, the court held that by including the words “all fixtures and fittings at the Premises whenever fixed (except Tenant’s fixtures)” and “all additions and improvements made to the Premises”, the Landlord was ensuring that a tenant exercising the break option could not do so by handing back an empty shell of a building which was dysfunctional and could not be occupied. Accordingly, the judge determined the Tenant had given back considerably less than “the Premises” as defined in the Lease and this did not amount to vacant possession. As such, the Landlord was entitled to a declaration that the Lease was continuing.

Significance

The case will be welcome news for landlords who can be reassured by the court’s strict interpretation of the definition of “the Premises” but serves as another reminder that a break condition requiring vacant possession will be particularly difficult for tenants to satsify.

The case is also a good reminder of the importance of accurate drafting when preparing documents to ensure that definitions and terms fully capture the intentions of the parties.

Permission to appeal to the Court of Appeal has been granted.

If you have any questions on this article or anything related, please contact Kate Andrews.

Please Release Me – the Requirement to give up Vacant Possession in Conditional Break Clauses

Have a question? Contact Kate

Associated services

Have a question? Contact Kate

Associated services



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