Landlord and tenant – Break clause – Vacant possession – Commercial lease – Defendant giving notice to exercise break clause in lease – Claimant seeking declaration that notice ineffective – Whether defendant giving vacant possession – Whether items left in premises being chattels or fixtures – Claim allowed
By a written lease dated 24 September 2008, the claimant granted a ten year demise of Suite 4, Unit 2, Riverside Park, Bromborough, Wirral to a primary care trust (PCT). The property comprised first floor premises in a building owned by the claimant. At the time they were let, the premises were essentially one large work space. The lease contained a break clause entitling the tenant to terminate the lease provided that a notice of the intention to exercise the break was served at least six months before the specified date, time being of the essence.
The PCT served notice on the claimant exercising the option to break. Soon afterwards, the residue of the term created by the lease became vested in defendant who became liable for thereafter to make the payments due under the lease and to comply with the other obligations that the lease imposed upon the tenant. It also wished to take advantage of the break clause.
The claimant did not dispute that the notice had been served at least six months before the break date but contended that it was not effective because the defendant had not given vacant possession of the premises as required by the break clause. Since the break date, there had been present in the premises a large amount of partitioning, kitchen units, floor coverings, window blinds, an intruder alarm and water stand pipes within a large meeting room (the works), none of which had been present when the lease was granted and had been brought into the premises thereafter but the PTC pursuant to a licence for alterations made between the claimant and the PTC and dated the same day as the lease.
The claimant brought proceedings for a declaration that the demise had not come to an end and an order that the defendant, as successor to the PTC, comply with its continuing obligations under the lease including the obligation to pay rent and other sums due under the lease. The defendant contended that the works were tenant’s fixtures and fittings which either by operation of law and/or a proper construction of the lease and licence had been integrated into, or annexed to, the premises and formed part of the premises.
Held: The claim was allowed.
(1) On the question whether an item was a chattel or a fixture, whether something was a fixture depended on the purpose and degree of annexation, viewed objectively. That was always a question of fact upon which the details of each case had to be carefully considered with a view to discerning the object and purpose of the annexation. Where, as here, items were physically attached to the land even slightly, the onus was on the party asserting that they were chattels rather than fixtures to establish that. Regard should be had to the purpose of the item whose status had to be considered and the purpose of the link between the item and the building. It was also relevant to ascertain whether the item was intended to be permanent and afford a lasting improvement to the building and whether it was an essential feature of the land or whether it was fitted simply for the use and enjoyment of the chattel. However, no test was definitive and it was a question of fact whether an article was a chattel or a fixture: Hellawell v Eastwood (1859) 6 EX 295, Berkley v Poulett (1976) 241 EG 911 and Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2006] EWHC 1008 (Ch); [2006] PLSCS 104 applied.
In the present case, having considered the tests for differentiating between chattels and fixtures, the court was satisfied that on the facts the partitions were chattels rather than tenant’s fixtures. The object of their configuration was to benefit the tenant rather than affording a lasting improvement to the premises and suggested that they were seen by the defendant as temporary. Furthermore, by the same line of reasoning, that was the status of the other items that constituted the works.
(2) The right to vacant possession comprised the right to actual unimpeded physical enjoyment of the property. One had to look at the physical condition of the property from the perspective of the person to whom vacant possession had to be given. If there was a substantial impediment to his use of the property or a substantial part of it, then vacant possession had not been given. In the present case, the court was satisfied that the partitions were an impediment which substantially prevented or interfered with the right of possession and deprived the claimant of the physical enjoyment of the premises. The claimant’s enjoyment of the premises encompassed having it in a condition in which it felt that it was a more attractive proposition to prospective lessees. In all the circumstances, on the assumption that the works did not form part of the premises, the claimant had established that vacant possession had not been given and, accordingly, the break clause was ineffective: Cumberland Consolidated Holdings v Ireland [1946] KB 264, Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2006] EWHC 1008 (Ch); [2006] PLSCS 104 and NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] EWCA Civ 683; [2011] 3 EGLR 1 applied.
Zia Bhaloo QC (instructed by hlw Keeble Hawson LLP, of Leeds) appeared for the claimant; Stephen Pritchett (instructed by Hill Dickinson, of Manchester) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read transcript: Riverside Park Ltd v NHS Property Services Ltd