Case law: Tenant's failure to remove partitioning made exercise of break clause ineffective
Tenants required to give vacant possession when exercising a break clause should ensure any partitioning is removed, or has genuinely become part of the structure of the building. Otherwise they risk the break being ineffective because they have not given vacant possession, following a recent ruling.
This update was published in Legal Alert - December 2016
Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.
A lease contained a break clause entitling the tenant to get out of the lease at a particular point in the tenancy, provided the tenant gave 'vacant possession of the Premises to the landlord'.
A tenant gives vacant possession of a property if it is free of the tenant's chattels (ie moveable property) and of people, and no-one else has the right or ability to occupy or possess it.
The landlord had granted the tenant a licence to make alterations to the premises, including installing a lot of partitions. These were standard demountable metal stud partitions. Each had painted plasterboard on both sides and a fixed aluminium skirting.
The premises had a raised floor and a suspended ceiling. The partitions were not fixed to the structure below the raised floor or above the suspended ceiling.
The tenant gave notice exercising the break clause. However, the landlord argued the eventual break was not effective because, at the break date, the partitions had not been removed. This meant the tenant had not given vacant possession of the premises and therefore remained liable for rent, etc for the remainder of the lease.
The tenant argued that the partitions were integrated into the premises such that they had become part of those premises, ie. they were fixtures, not moveable chattels. The tenant also argued that the partitions did not interfere with the use of the premises by a new tenant. Therefore, the tenant had given vacant possession, even though the partitions were still there.
The High Court ruled in the landlord's favour, and found that the partitions were chattels and not tenant's fixtures. The choice by the tenant of demountable partitions, which were not attached to the structure and could be removed easily without damaging either the partitions or the property, implied that it had intended them to be temporary, rather than to be treated as part of the premises. In addition, the way the partitions had been installed created a lot of small offices which were suitable for the outgoing tenant - but would not necessarily be appropriate for a new tenant.
The Court ruled that the partitioning therefore 'substantially prevent[ed] or interfere[d] with the enjoyment of the right of possession'.
- Tenants required to give vacant possession when exercising a break clause should ensure any partitioning is removed, or has genuinely become part of the structure of the building, or risk the break being ineffective because they have not given vacant possession
Case ref: Riverside Park Limited v NHS Property Services Limited  EWHC 1313
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.