A break clause in a lease may only be exercised if any conditions attached to it have been satisfied. The clause will be strictly construed by the courts. This was demonstrated in the recent case of Riverside Park Ltd v NHS Property Services Limited in which the High Court analysed whether the tenant had complied with a condition in a break clause which required the tenant to give vacant possession of the premises on or before the break date.
When the lease was granted, the premises were open plan but, at the break date, a large amount of internal partitioning installed by a former tenant, had been left in place along with some kitchen units, floor coverings, window blinds and an intruder alarm.
The tenant argued that the items were fixtures which had been integrated into the premises but the court decided that on the particular facts all the items were chattels due to their limited attachment to the premises and that the existence of the partitioning substantially interfered with the landlord’s right to possession, meaning that vacant possession had not been given.
The court did highlight that although other previously tried cases can provide guidance in comparable circumstances, each case will turn on its own particular facts.
Due to the uncertainties arising out of the concept of vacant possession, tenants prefer break clauses which avoid this expression and favour provisions which require the tenant to give up occupation.
In fact, The Lease Code 2007, which is a voluntary code, provides that a break right should not be conditional upon vacant possession being given and that disputes about the state of the premises, or what has been removed or left behind, should not frustrate the tenant’s ability to break the lease. Either party will still be able to claim damages from the other in relation to any breach of covenant following termination of the lease.
This case is a reminder that if a break clause is subject to conditions, they must be satisfied. The tenant should check the terms of the lease and any licence for alterations.
