Allyson Colby chats about chattels and fixates on fixtures in her review of a recent case on vacant possession
Key points
- Tenants who are required to give vacant possession on a break date need to do more than give up occupation
- Consider which items are chattels and must be removed and which are tenant’s fixtures and may not need to be removed
- The lease, and any supplemental licences, should be checked to ascertain what effect they have on the tenant’s obligations
Picture open-plan space in a unit on a business park. Now fast-forward five years. Having served a notice under a break clause in its lease, the tenant has moved out without removing alterations approved by the landlord at the start of the term.
The tenant’s internal partitioning remains, configured to create a series of small offices. There are blinds at the windows and carpet tiles on the floor. Picture too a kitchen area containing kitchen units and vinyl flooring. There are also water standpipes, fed from the kitchen, in the room next door, and the premises are protected by the tenant’s still-active intruder alarm.
A review of the break clause reveals that the tenant was required to give vacant possession on the break date and warning bells should start to ring. The tenant will have had to satisfy the condition in order to terminate the lease. Has it done so?
Vacant possession
Riverside Park Ltd v NHS Property Services Ltd [2016] EWHC 1313 (Ch); [2016] PLSCS 222 highlights the fact that the phrase “vacant possession” requires more than giving up occupation. It also reminds us that provisions in documents that are supplemental to a tenant’s lease may help to define the extent of the tenant’s obligation and should never be ignored.
“Vacant possession” means that the tenant must remove all its possessions, return the keys to the landlord and ensure that no one is in the premises on the break date. In short, the tenant must not do anything to suggest it is still using the property, or that would substantially interfere with the landlord’s ability to assume immediate and exclusive possession, occupation and control: Ibrend Estates BV v NYK Logistics (UK) Ltd [2011] EWCA Civ 683; [2011] 3 EGLR 1.
Objects brought on to land may have become an integral part of the land, or may be either chattels or fixtures. Chattels may have been affixed temporarily to premises, but they remain the property of tenants and should be removed to provide vacant possession at the end of a lease.
A fixture is something that used to be a chattel, before being annexed to and becoming part of the property. Tenants are not entitled to remove landlord’s fixtures. However, they are entitled – but not obliged – to remove their own fixtures at the end of the term, unless the lease states otherwise.
In this case, it was agreed that, if the items were fixtures, then they were tenant’s fixtures. Indeed, the tenant argued that its alterations should be categorised as such. They had become part of the premises themselves and, because the tenant was required to give vacant possession, their continued presence did not impede the operation of the break clause.
Chattels
The judge noted that the status of an article is always a question of fact. The tenant had installed demountable partitioning, connected to non-structural parts of the premises by screw fixings. It had partitioned the space for its own benefit, and not to make a lasting improvement to the premises. Furthermore, the partitions could be easily removed without damaging them, or the premises themselves. All this indicated that they were chattels.
It followed that all the other items were chattels too, although the judge doubted whether their presence had deprived the landlord of vacant possession. The units in the kitchen were either free-standing or only loosely attached to the wall. The floor coverings could be lifted relatively easily and it would not be difficult to remove the blinds. The intruder alarm was a chattel too. It had been installed for the tenant’s own convenience and, if it remained active, this was indicative of an oversight rather than an intention to control the premises.
However, the continued presence of the partitions, which – to quote the landlord – had turned the space into a “rabbit warren”, had compromised the landlord’s ability to use and enjoy a substantial part of the premises. Consequently, vacant possession had not been given and the tenant was stuck with the lease until the expiry of the term.
Fixtures
In other cases, partitions might constitute fixtures. Would it have made a difference, had they been categorised as fixtures here? Not in this particular case.
Tenants need not remove their fixtures, unless their leases require this of them. The tenant pointed to a provision in the licence for alterations that required their removal if the landlord so requested. The tenant relied on the fact that no such request was made, which – it claimed – meant that it had been entitled to leave fixtures behind.
However, the tenant had overlooked a separate provision in the licence stating that the licence would lapse if the tenant did not comply with its obligations while making the alterations. Furthermore, another provision required the tenant to reinstate the premises if the licence ceased to have effect.
The judge ruled that the licence had lapsed because the tenant had not complied with its obligation to obtain the insurer’s approval for the work (as well as being in breach of other covenants). The judge interpreted the licence to mean that the obligation to reinstate applied automatically in such circumstances. Consequently, the tenant would have been obliged to remove its fixtures whether the landlord requested reinstatement or not, and their continued presence would have meant that vacant possession had not been given on the break date.
Allyson Colby is a property law consultant
