Capital Park Leeds Plc v Global Radio Services Limited (2021) ' Court Of Appeal Confirms What Is Actually Meant By Vacant Possession On Lease Termination

Published date24 August 2021
Subject MatterLitigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Landlord & Tenant - Leases
Law FirmWinckworth Sherwood
AuthorMs Jane Bloomer

The commercial landlord and tenant sector finally has some clarity on exactly what is meant by a tenant's obligation to give back vacant possession at lease termination.

Both occupiers and occupiers' solicitors alike can breathe a sigh of relief regarding what has to be done in order for a tenant to comply with the obligation to yield up vacant possession at the expiry of the term of a lease.

Facts

In Capital Park Leeds Plc v Global Radio Services Limited (2021), the tenant, Global Radio Services Limited ("GRS") exercised the option to break it's 24 year lease. GRS sought to comply with the conditions contained within the break clause, one of which was to provide vacant possession on or before the break date.

In the period leading up to the break date, GRS undertook substantial work to the premises to satisfy their repairing obligations, whilst in discussion with the landord. This break clause was not conditional on compliance with repairing or decorating covenants, but it's likely that GRS wanted to minimise terminal dilapidations and reinstatement liability. In doing so they removed substantial items, including heating pipework, radiators, lighting, ventilation ductwork, smoke detections systems and much more. Negotiations broke down, and GRS did not have the opportunity to complete the work prior to the break date.

Outcome

The definition of the Demised Premises included the landlord's fixtures and fittings, plus additions and improvements. The landlord argued that, as a result of the removal of many of the landlord's fixtures, vacant possession of the "Demised Premises" had not been given.

Initially the High Court agreed, taking the approach that the building was "dysfunctional and unoccupiable", and ordered that the break clause failed because the building was significantly less than was originally demised. It therefore became possible to give "too much" vacant possession, and tenants who were trying to comply with vacant possession obligations and adopted the previously sensible approach of if in doubt, take fixtures out, inadvertently found themselves...

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