This considered the issue of whether a break condition in a commercial lease requiring the Tenant to hand back ‘’Premises’’ with vacant possession had been satisfied despite the Tenant leaving the property in a dysfunctional condition.
The lease in question defined ‘’Premises’’ as including the original building on the property, landlord’s fixtures and all additions and improvements.
The Tenant gave notice in accordance with the break clause and stripped out various parts of the Premises with a view to replacing them before vacating. The Tenant did not replace these features before moving out.
The Landlord submitted that the ‘’Premises’’ (as defined) were to be returned to them under the break clause which extended to the Landlord’s fixtures and as such the Tenant had failed to comply with the break clause.
The High Court supported this and held that the requirement for VP had not been satisfied, as the definition of the ‘’Premises’’ prevented the Tenant from handing back an empty shell of a building which was dysfunctional and could not be occupied.
The Court of Appeal overturned this decision and held that a condition for vacant possession requires the Tenant to return the property to the Landlord free from people, chattels and legal interests, rather than being concerned with the physical condition of the property and that the High Court’s interpretation would have unintended implications for the parties and would undermine business common sense, particularly as the Landlord could recover compensation from the Tenant for the breach of repair separately.
In this particular lease, the break clause was not expressed to be conditional on the Tenant having observed and performed any covenants in the lease, including any repairing obligations.
Overall, the court made it clear that a Tenant wishing to exercise a break clause has to comply with any conditions attached to it, but those conditions should not necessarily be interpreted so as to favour the Landlord.
Should you require any advice about break notices or break conditions, please contact either Claire Moss, Partner or Liz Henwood, Solicitor on 0113 280 2000 or via email@example.com or firstname.lastname@example.org
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.