Senior Associate, Claire Moss, considers how the recent case of Riverside Park Ltd v NHS Property Services Limited  highlights how important it is for tenants to comply fully with the terms of a lease in order to successfully exercise a break clause.
In 2008, Riverside Park Ltd (“Riverside”) granted NHS Property Services Limited (“NHS”) a 10 year lease of an open plan office. The lease gave NHS the right to exercise a break option on the 5th anniversary of the commencement date, conditional upon NHS giving up vacant possession of the property.
After entering into the lease, Riverside granted NHS a licence to carry out various alterations to the property, including the erection of internal partitions. NHS subsequently exercised the break option and left the property. Prior to leaving the property however, it did not remove the internal partitions and it also left various other items at the property including an alarm system and floor and window coverings. Riverside asserted that by leaving these items at the property, NHS had not given vacant possession and therefore had not validly exercised the break option.
The High Court was tasked with determining whether the partitions and other items left at the property were chattels or fixtures. This decision turned on how the partitions had been installed and the purpose of the installation. In respect of the former, the Court found that the partitions had been connected to non-structural parts of the property by the use of screws and could therefore be easily removed without damaging either the partitions or the property. In respect of the latter, the Court found that the partitions had been installed for its own benefit rather than for the purpose of improving the property. Their presence in the property after NHS had left was therefore a hindrance to Riverside. On that basis, the Court concluded that the partitions were chattels and that by failing to remove them from the property when exercising the break option, NHS had failed to give vacant possession. NHS therefore remained bound by the lease until the end of the 10 year term.
It is important to note however that whether an item is a fixture or a chattel will be dependent on the individual facts of each case and therefore each case needs to be considered on its own merits.
So if you are a tenant looking to exercise a break option within a lease, it is vital that you seek legal advice as to what needs to be done in order to comply with the requirements of the break. Furthermore, if, as is usually the case, vacant possession has to be given, careful consideration will need to be given as to what you can and cannot leave behind at the property to ensure that the break is effective.
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.