Break Clauses and Vacant Possession
The negotiation of break clauses now falls within our everyday remit. Landlord's solicitors continue to disregard the unconditional breaks referred to in the Heads of Terms and seek to impose a whole host of conditions. What amounts to "vacant possession" where this is a condition on a break has long be a debated area.
A recent case reaffirms that a Tenant should not accept this condition. A Tenant, anxious to ensure it incurred no terminal dilapidations liability, left contractors on the premises beyond the break date and failed, it was adjudged, to deliver vacant possession. Consequently they could not operate their break.
The Court of Appeal case of NYK Logistics (UK) Limited V Ibrend Estates BV [2011] EWCA Civ 683 has once again brought into the spotlight the definition of "vacant possession" in the context of a break clause.
The facts:
- Tenant break clause conditional on delivering vacant possession on the Break Date
- Tenant anxious to avoid any terminal dilapidations liability
- Tenant left contractors at premises carrying out repairs beyond the Break Date
The judgement:
- Tenant failed to deliver vacant possession
- Tenant not satisfied condition of break clause and consequently operation of break ineffective
Our Conclusions:
- Vacant possession means the premises must be empty of people and the Landlord able to assume and enjoy exclusive possession, occupation and control. Premises must be substantially empty of chattels.
- Do not allow your break clause to be conditional on "vacant possession"
Top tips on break clauses
- Always (where possible) agree unconditional.
- At a push agree conditional on main rent up to date only and ensure such rent is demanded more than 14 days before the break date.
- Ensure short notice periods where possible to allow flexibility
- Never agree conditional on vacant possession.
- Never agree conditional on compliance with lease covenants.
- Always ensure monies paid in advance are due back on the break date.
For more information on this or for advice on any retail property issue, please contact: