Broken Covenants - How To Ensure A Break Is Valid

A lease will almost always stipulate the condition in which the demised property should be yielded up. However, even if it does not contain an express yield–up provision, a term will be implied that the tenant will deliver the premises back to the landlord. Thus, the tenant should vacate (save for the performance of reinstatement works) and remove its chattels. This is all the more important when it forms the subject of an express break condition.

In Ibrend Estates BV v NYK Logistics (UK) Ltd [2011] EWCA Civ 683; [2011] 36 EG 94, the Court decided that a tenant had failed to give vacant possession in accordance with the break clause in its lease because workmen that it had employed remained in the property following the break date to finish off outstanding repairs.

The tenant's attempt to break the lease therefore failed, leaving the tenant with no option but to reassume its obligations under the lease and the inevitable cost that this involved.

Points to be considered

When ensuring that the tenant complies with its obligation to provide vacant possession it is of fundamental importance to ensure compliance with all terms of the lease that govern delivery up of the demised property. Where the tenant is attempting to break the lease, it is also paramount to ensure that the conditions attached to the break right are followed to the letter.

The yield–up clause in any lease will usually require a tenant to remove fixtures and any alterations it has made to the property and to make good any damage caused by the removal, but the reinstatement obligation may also be in a licence for alterations. There may also be further covenants in the body of the lease but outside of the yield-up clause and, as already indicated, the conditions attached to any break right must also be critically examined should it be a break situation.

Where a tenant is attempting to break the lease early, failure to be in full compliance with the break conditions will almost certainly render the attempt to break invalid unless the tenant has a kind landlord that is prepared to overlook the tenant's failure. In the current economic situation such kind landlords are in short supply.

The question of vacant possession

The term "vacant possession" stipulates a condition to yield up a property in a vacant state that can be immediately occupied. This is required of a seller of non-tenanted property and is often a condition of a break option or of the expiry of the lease. It is also a...

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