The High Court handed down another significant break clause judgment last week, in relation to the test of vacant possession and the need to remove chattels (moveable property).
A break clause can be included in a lease allowing either the tenant or landlord to terminate the lease early. Depending on how it has been drafted, the right to break the lease may arise on one or more specified dates, or else be exercisable at any time during the term of the lease on a rolling basis.
Frequently break clauses have conditions attached to them (for example, providing vacant possession), and these are strictly construed by the Courts.
There have been a number of reported cases over the last couple of years around the issues associated with conditional break clauses, where landlords have been able to argue that a tenant has not successfully exercised the conditions of their break clause. The recent case of Riverside Park Ltd v NHS Property Services Ltd is another one to add to the list.
The tenant in this case took a lease of open plan offices and installed partitions within the building to create smaller offices, in addition to fitting kitchen units and floor coverings. They then exercised a break clause in 2013, leaving the partitions and furniture in place. As a result of this, the landlord claimed that the tenant had not complied with the condition of vacant possession.
The tenant argued that the partitions and fittings now formed part of the premises and therefore could not be seen as an impediment to giving vacant possession of the premises. The landlord, on the other hand, argued that the purported exercise of the break clause was void due to the partitions being classed as chattels and therefore the tenant had not given vacant possession of the premises.
In last week’s decision, the High Court ruled that the partitions were to be classed as chattels, on the basis that they were not affixed to the structure of the building and could be removed without damage. Furthermore, the alterations made by the tenant were held to have interfered with the landlord’s right of possession.
As a result, the tenant’s break clause was deemed as invalid and their liability for rent continued for another five years.
This case serves as another example of the expensive consequences of failing to draft and/or exercise a break clause correctly and more so a reminder of the need to get good quality advice before committing to a lease.
Do not hesitate to contact us today on 0845 287 0939 or here, in order to speak with a specialist commercial property solicitor who will be able to advise you on in relation to your lease specifically highlighting any potential legal implications you may wish to consider.