In the recent case of Riverside Park Ltd v NHS Property Services Ltd 2016, once again the meaning of vacant possession was tested within the context of operating a break clause.
The NHS took a ten year lease on open plan office space, with the option of exercising a break clause after 5 years, which they did. On the due date they left in place demountable partitioning that they had installed (referred to as a “rabbit warren”).
At termination, the lease conditions obliged the tenant to have removed their alterations and give vacant possession.
The High Court decided that failure to remove the partitioning rendered the break ineffective as the lessee was in breach of their obligation.
The consequence was that NHS was lumbered for a further 5 years with a lease they didn’t intend to have or want.
This is a reminder, as in NYK Logistics Ltd v Ibrend Estates 2011 that the courts will treat lease conditions extremely strictly where options are exercised and failure to comply in even the most minor way, can be disastrous.