Tenants Given A Break With Regards To Vacant Possession
The recent Court of Appeal case of Capitol Park Leeds plc v. Global Radio Services Limited  reversed the decision of the High Court and found that a tenant had complied with the break condition of returning the premises with vacant possession.
The tenant had removed a number of the landlord’s fixtures and fittings but the Court determined that vacant possession does not relate to the physical state of the premises but instead the need to hand the premises back free from physical items and third party rights of occupation.
The items removed included ceiling tiles, lighting and heating equipment which had not been reinstated by the break date. The landlord had argued at trial that the removal of these fixtures had resulted in the premises being handed back without vacant possession as too much had been removed leaving the landlord with substantially less than the defined premises. The tenant argued that vacant possession required the returning of the premises free of tenant’s chattels and legal interests which it had complied with, despite any breaches of the repair and reinstatement obligations within the lease.
Much to the relief of the tenants, the Court of Appeal agreed that a condition for vacant possession is not concerned with the physical condition of the property. The break clause was not conditional upon the tenant having observed and performed any covenants in the lease, a precondition which is now routinely unacceptable to any well-advised tenants. In such circumstances, the landlord will still have a claim for breach of repair or reinstatement obligations but cannot frustrate the break clause even in the event of the tenant having gone too far with its stripping out of the premises.
Although the Court of Appeal ultimately decided in favour of the tenant and took a pragmatic and commercial approach, it is crucial that tenants seek the advice of a commercial property solicitor when agreeing the wording of break conditions and subsequently ensuring compliance with the same, should it choose to exercise the right to break.