The Court of Appeal’s overturning of a High Court decision in relation to the vacant possession requirement in a break clause could turn the tide in favour of commercial tenants, according to Thursfields Solicitors.
In the case of Capitol Park Leeds plc v Global Radio Services Ltd, the High Court initially held that a tenant’s failure to reinstate the landlord’s fixtures and fittings meant the property had not been returned with vacant possession as it was left in a “dysfunctional and unoccupiable” state.
The Court of Appeal has now overturned that judgment, holding that the pre-condition was confined to the requirement of returning the premises free from “people, chattels and interests” and was not concerned with the physical state of the unit.
Parmveer Virdee, a solicitor in the commercial property department at Thursfields, said: “Case law had previously dealt with situations where the tenant had failed to remove people, chattels or existing legal interests in the property.
“However, this case was unique because all of these matters had been removed by the tenant.
“The Court of Appeal decided that the break option had still been validly exercised by the tenant even though the property was returned in a dire state.
“This was because the landlord still had the option of recovering its losses for the physical damage caused to the property via a dilapidations claim.
“As tenants must ensure strict compliance with break pre-conditions, the Court of Appeal’s judgment will be welcomed as it provides further clarity on what is required to comply with a vacant possession break condition.”
Virdee added: “As break options can be complex, we would recommend obtaining legal advice early if you are either looking to offer a break option to your tenant or want to serve a break notice on your landlord.”