When a break clause requires a tenant to give vacant possession to its landlord, the tenant must remove all its possessions, return the keys to the landlord and ensure that no one is in the property on the break date. In short, the tenant must not do anything to suggest that it is still using the premises or that would substantially interfere with the landlord’s ability to assume immediate and exclusive possession, occupation and control of the property: NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] EWCA Civ 683; [2011] 3 EGLR 1.
The sole issue that arose in Secretary of State for Communities and Local Government v South Essex College of Further and Higher Education [2016] EWHC/EWCA Civ; [2016] PLSCS 249 was whether the tenant had given vacant possession to the landlord on the break date in the parties’ lease. Interestingly, the break clause required only that the tenant give “possession of the whole of the premises” to the landlord. However (and perhaps wisely), the tenant did not try to ascribe different meanings to, or to distinguish between, “possession” and “vacant possession” when the case came to court.
The tenant had been providing educational services at the premises, which had been partitioned off to create an administrative area, a server room and six teaching rooms. In addition to the freestanding partitioning, the tenant left several other items behind too: computer screens; a photocopier with a sign on top of it saying “do not move”; a box of student files needed for audit purposes; two heavy reception desks; and cabling, wiring, trunking and electrical sockets relating to the IT equipment and telephone system used by the tenant. To make matters worse, the tenant had not arranged a handover meeting, had kept hold of the only keys, and had not shared the door codes and alarm codes with the landlord.
The court reminded the parties that the fact that the tenant had hung on to the keys was relevant, but not determinative. Nonetheless, it agreed that the tenant had not taken any positive steps to demonstrate objectively, as opposed to subjectively, that it was yielding up possession of the property – and had not given vacant possession on the break date.
In Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2007] EWCA Civ 7, the court applied two tests in order to decide whether vacant possession had been given. The first test focused on the activities of the tenant – to see whether it was still using the property for its own purposes. The second test focused on the physical condition of the property from the landlord’s perspective – to see whether there was a substantial impediment to its use of the property, or a substantial part of it.
The judge noted that the tenant had continued to make use of the premises, by storing goods there, after the expiry of the break notice. Furthermore, the chattels left in the premises substantially prevented or interfered with the landlord’s ability to use or occupy the property or a substantial part of it, because it would first have to remove the partitions and two relatively substantial desks, as well as the photocopier and the other chattels, and the trunking and cabling. Therefore, vacant possession had not been given and the lease continued in full force and effect.
Allyson Colby, property law consultant
