Tenant’s Failure to Remove Partitioning Meant no Vacant Possession, Rules High Court

A 2016 decision by the High Court ruled that commercial tenants with a ‘vacant possession’ break clause in their lease could nullify the termination of the lease by failing to properly remove all their belongings from the premises – including wall partitioning, floor coverings and kitchen units.

The High Court decided in the case of Riverside Park Limited v NHS Property Services Limited that the tenant’s failure to remove demountable partitioning, window blinds and kitchen units within an office space meant that vacant possession as a condition of the tenant’s break clause was not provided and the break had not been effectively exercised.

The tenant had put in place partitions, affixed only by screw fixings and designed to be easily disassembled, on a raised floor that reached to the underside of the suspended ceiling.

The landlord, Riverside Park, argued that the wall partitioning, and also floor coverings and kitchen units that were left, were not part of the premises.

Partitions were chattels – not fixtures

The judge ruled that these items were chattels rather than fixtures and fittings that were part of the premises and held that the landlord’s failure to remove them nullified the ‘vacant possession’ conditions of the break clause, meaning that the condition had not been satisfied and the lease remained in full force and effect.

The landlord’s granting of 10-year lease to NHS Property Services had included an option for the tenant to break the lease at the end of the fifth year – but this break was conditional upon the tenant giving vacant possession of the premises to the landlord.

Judge Saffman said:

“The very fact that the [tenant] chose to erect demountable partitioning and not to affix the partitioning to the structure … suggests that it was seen by the [tenant] as temporary.”

‘Rabbit warren’ offices not an attractive proposition for a future lessee

He said that the partitions substantially prevented and interfered with the right of possession, saying it was clear that the ‘rabbit warren’ configuration of small offices which had been constructed was not the attractive proposition it needed to be for future lessees.

Judge Saffman also said he was unconcerned that the landlord had presented no evidence that it could not let the property to any future lessee: “The landlord does not have to prove that the premises cannot be let to anybody else to establish that the failure of the tenant to provide vacant possession had compromised the landlord’s enjoyment of the premises; The landlord’s enjoyment of the premises “encompasses having it in a condition in which it feels that it is a more attractive proposition to prospective lessees.”

He also noted that, had the items been classified as fixtures and fittings, the tenant would still have failed to properly exercise the break clause because the definition of the demised property specifically excluded tenant’s fixtures.

Judge acknowledges harshness of his ruling

The judge acknowledged that he was taking a hard line in the case, given that it “essentially holds the [tenant] responsible for ongoing substantial rent all for the sake of a failure to undertake a few thousand pounds worth of work.” However, he said there was “no room for general considerations of fairness or conduct” when considering whether the conditions attached to the valid exercise of a break clause had been met.

Because there is no unequivocal definition of vacant possession, the case law places the burden of responsibility on tenants seeking to prove compliance. Tenants must in a timely manner consider what work needs to be done to secure the effective break of their lease.

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