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Breaking point - when are vacant premises really vacant?

Posted: 18th July 2011   In: Dispute Resolution, Commercial Property

A commercial tenant failed to exercise a break clause correctly because it was still carrying out repairs to the leased premises after the day it should have given up vacant possession.

The case involved a company that had two break options on a warehouse that it leased. The first date was for April 2009 and the second was for December 2009.

The tenant decided to exercise the break clause on the April date. The landlord drew up a schedule of dilapidation repairs that needed to be carried out in accordance with the lease.

A site inspection was carried out two days before the termination date. The warehouse was then empty and all the tenant’s fixtures and fittings had been removed. The tenant agreed that a few more minor repairs were needed and arranged for the work to be done.

However, the tenant’s contractors didn’t complete the repairs until six days after the termination date. The landlord said this meant the break clause had not been properly exercised and demanded rent until the next termination date in December.

The tenant disputed this but the court found in favour of the landlord.

The tenant appealed on the basis that it was unjust to say a failure to complete a few minor repairs on time amounted to a failure to give up vacant possession. It also submitted that it had not tried to exclude the landlord from the premises after the break clause termination date.

The Court of Appeal, however, upheld the original decision. It held that the fact that the tenant had not tried to exclude the landlord from the premises was irrelevant. What mattered was that the tenant had failed to satisfy the conditions of the break clause.

These demanded that the tenant had to give up possession to the landlord by midnight on the designated date and not a minute later.

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