When operating a break clause, be sure to comply strictly with the vacant possession pre – condition.
In Capitol Park Leeds Plc v Global Radio Services (October 2020), the lease provided that the tenant could operate the break clause if it “gave vacant possession of ‘the Premises’ to the Landlord on the relevant Tenant’s Break Date”. The definition of ‘the Premises’ included the original building and landlord’s fixtures.
After giving the requisite notice to break, the tenant commenced dilapidation works but ceased before completing them to negotiate a settlement with the landlord but was unsuccessful. At the break date he left the premises stripped of significant elements of the building and landlord’s fixtures including radiators, lighting and suspended ceilings. The tenant contended that it gave vacant possession because the premises were left empty of people and chattels and he had therefore complied with the break condition.
The judge however took the view that what the tenant had given back on the break date was not ‘the Premises’, as defined in the Lease. He also held that the tenant was not entitled to rely upon the landlord being estopped from enforcing the lease terms, on the basis that he had been in negotiations before the break date. In consequence, the lease continued.
The break clause pre-condition in this case is not uncommon. Tenants who find themselves in a similar position will need to start their preparations for exercising a break option as early as possible in order to understand exactly what they will be expected to hand back at the break date. In particular, they will need to identify all additions and improvements which have been carried out since the grant of the lease to ensure that they are all in place at the break date.