Tenant break clauses
Tenant break clauses - how vacant for vacant possession?
A recent case has examined the issue of what a tenant has to do in order to give vacant possession of a property after exercising a break clause in a lease.
In NYK Logistics (UK) Ltd v Ibrend Estate BV, the tenant served notice to terminate its lease on 3 April 2009. The break clause required the tenant to pay all of the rent due up to 3 April 2009 and to give vacant possession of the property to the landlord on that date. Unfortunately, the tenant had not carried out all of the works required to comply with its repairing/dilapidations obligations under the lease by 3 April 2009 and the tenant’s contractors re-entered the property between 6 and 9 April 2009 to carry out the remaining works. The tenant’s security guard also remained for a week after 3 April 2009 due to concerns regarding vandalism. The landlord contended that the tenant had not given it vacant possession of the property and the court agreed.
The Court of Appeal set out its understanding of the concept of vacant possession as follows.:
- The property must be clear of all people. This includes workmen carrying out repairs to the property on the tenant’s behalf.
- All chattels must be removed from the property. There is some leeway on this as the courts have decided that any chattels left behind will only prevent vacant possession being given if they substantially prevent or interfere with the landlord’s right of possession of a substantial part of the property. However, it is best not to rely on this technicality as it could lead to expensive litigation in arguing the point with your landlord.
- The landlord must be able to exclusively use and occupy the property immediately after the break date.
If you have a break date coming up, it is important that you plan how you are going to achieve vacant possession as this will almost certainly be a requirement of the lease. If you have sub-let the property, you must ensure that your sub-tenant complies with all of the criteria too. If you are carrying out repairs to the property yourself to avoid or address a dilapidation's claim from your landlord, but you have not finished the works by the break date, you should still comply with all of the above criteria and afterwards seek the landlord’s consent to re-enter the property as a licensee for the purpose of carrying out the works.
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This article contains information of general interest about current legal issues. It does not give legal advice and specific advice should always be sought about your particular circumstances. We will be happy to assist.
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