Vacant possession date must be adhered to; PROPERTY BRIEFING.
LEASES of commercial premises frequently contain break clauses these days. These clauses allow the tenant to end the lease prematurely. In order to do so, the lease will often specify conditions that the tenant must satisfy, if the exercise of the break clause is to be effective.
One of the conditions most frequently found is that the tenant is to give vacant possession of the premises to the landlord, when the lease is to terminate.
Understandably, the landlord needs an empty premises to re-let, free of any claims to occupy from the former tenant, under-tenant or third party who has been allowed to occupy them in the past.
What amounts to 'vacant possession' in these circumstances has been well illustrated in a recent case before the Courts - NYK Logistics Limited v Ibrend Estates BV.
Here, the tenant served notice to exercise a break clause in its lease of warehouse premises. That clause required the tenant to give vacant possession on the break date. The landlord commissioned a schedule of disrepairs, for which the tenant was liable under the lease. Two days before the break was to be effective, the parties met on site to review what works remained to be done.
The landlord said that it would send someone to collect the keys, although no one was in fact sent. At that stage, the premises were clear of the tenant's fixtures, fittings and stock. The tenant's contractors undertaking the repair works did not complete them until six days after the break date.
The court held that vacant possession in the break clause had to be given by midnight on the designated date and not a minute later. 'Vacant possession' means that the premises was empty of people and that, in this case, the landlord was able to assume and enjoy immediate and exclusive possession, occupation and control of them. The tenant had remained in occupation by virtue of its contractors remaining on site to complete the repair works. The fact that the landlord could have made use of most of the premises or that the tenant could have pulled its contractors off the site at a moments' notice were not relevant.
Nor were the statements made by the landlord that it would send someone to collect the keys binding or sufficient to waive its entitlement to vacant possession.
The lesson to be drawn for tenants is to ensure that by midnight on the day that you are to hand over vacant possession, ensure that the premises are completely empty and the keys returned. If there is still repair work to be completed, obtain the consent of the landlord to return at a later date, once it has acknowledged that the lease has been lawfully terminated.
Richard Freeman-Wallace is a partner at Watson Burton LLP