Break clauses: the tricky business of vacant possession

11 August, 2016
by: Cripps Pemberton Greenish

Empty officeLeases often require vacant possession to be given when a lease is broken.  In the case of Riverside Park Ltd v NHS Property Services Ltd [2016] EWHC 1313 (Ch), a tenant exercised a break clause and, upon vacating the premises, left behind large amounts of partitioning, kitchen units, floor coverings, window blinds, an intruder alarm and water stand pipes.  The question arose as to whether these were fixtures (and so formed part of the premises) or chattels (meaning vacant possession would not have been given and the break was therefore ineffective).

 

Whether something is a fixture or chattel is a question of fact in every case, but the court considered that regard should be given to the following factors:

 

  • The purpose and degree of annexation;
  • Whether the item is intended to afford a lasting improvement to the building;
  • Whether the item is an essential feature of the land.

 

The right to vacant possession means the right to unimpeded physical enjoyment of the property.  The partition was a substantial impediment to the landlord.  Further, the court considered the items to be for the benefit of the tenant, not as a lasting improvement to the premises and they could also be easily removed without damaging either the items or the premises.  The court therefore felt that the items were chattels, vacant possession had not been given and the break clause in turn was ineffective.

 

This is a reminder that where a break clause includes a requirement to give vacant possession, the tenant must comply and remove all their chattels from the premises.  A tenant may need specialist legal advice on the difference between a chattel and a fixture.  The consequences for the tenant in this case were that the lease, and all their liabilities under the lease, remained in full force.