Vacant Possession: The Return of the Trilogy

The Court of Appeal has overturned the decision in the High Court case of Capitol Park Leeds v Global Radio Services.  The case concerned whether the tenant had gone too far in providing vacant possession (a pre-condition to exercising a break) as it had stripped out the premises including the landlord's fixtures and fittings.  The judge at first instance held that the tenant had not given vacant possession within the meaning of the lease and failed to break because the premises had been left dysfunctional and unoccupiable.

The Court of Appeal has taken a different view, reiterating that leaving a property with vacant possession means leaving a property free from "people, chattels and interests" (the so-called "trilogy"). Whilst the Court of Appeal recognised that the premises had been completely stripped out, it importantly noted that the landlord retained the right to claim damages for breach of covenant after expiry of the lease.  The clauses in the lease which did deal with the state of repair (such as the yielding up clause) lent support to the tenant's arguments that the state of repair was not a strict requirement to exercise the break (in terms of delivering vacant possession).   

This looks like a common sense decision from the Court of Appeal with regard to the essential fairness between the parties and re-sets the position on the meaning of vacant possession in this context.

Practical Considerations

As always, it remains fundamental for a tenant to exercise a break strictly in accordance with the conditions set out in the lease to avoid any potential arguments and the ongoing liabilities for rent and service charge.

It is always advisable to take early advice on such matters to put the tenant in the best possible position prior to exercising the break. 

If anyone would like advice in respect of any break clauses, then please do get in touch with our Property Litigation Team.

Here is a link to the Court of Appeal judgment.

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