We are often asked by landlords whether tenants need to completely strip out premises including partitioning when they are required to deliver up vacant possession. This is most common when break clauses are conditional on delivering vacant possession.
What does vacant possession mean?
In the leading case (NYK Logistics Limited –v– Ibrend Estates), it was decided that –
- the property must be empty of people
- the person needing vacant possession must be able to take immediate and exclusive possession, occupation and control of the property
- The property must be empty of chattels and Ibrend made it clear that this element of the test is only breached if the chattels remaining are significant so that they substantially prevent or interfere with the enjoyment of the right to possess a substantial part of the property
How are partitions relevant to VP?
The recent case of Riverside Park Limited –v- NHS Property Services Limited had to decide whether the substantial amount of demountable partitioning left by the tenant on the premises frustrated the break notice. This was another case where the break notice was only effective if vacant possession was delivered on the break date.
In the Riverside case, the partitions had been constructed by the tenant on top of a raised floor and reached up to the underside of the suspended ceiling and were only fixed by screw fixings. They were not affixed to the structure. They were clearly regarded by the expert witness as demountable. The tenant had turned open plan space into a rabbit warren of small offices.
The Judge held that these partitions were an impediment which substantially prevented and interfered with the right of possession. He also held that he was not concerned that the landlord had no evidence that it could not let the property to anyone else. The landlord’s unchallenged evidence was that it was clear that the rabbit warren configuration was not the attractive proposition it needed to be for its future lessees.
Are partitions always chattels?
This is awkward and the answer will depend on the facts in each case (and there are a lot of conflicting cases on chattels and fixtures) In Riverside the lightly affixed and demountable, partitions intended to benefit the tenant, rather than improve the premises and were chattels.
It will be possible that some partitions will have been annexed to the structure and become fixtures. Then the questions will be complex and will depend on the lease and any licence to alter before it becomes clear whether they would have to be removed at the end of the term.
Whilst this looks like a hard decision for tenants, it is consistent with the basic principle that there has to be strict compliance with options and that as break clauses are a species of option tenants must work to achieve strict compliance (or negotiate clearer leases and licences to alter).
This case was based on its very specific facts and it is only a High Court case but landlords may be able to use the argument about demountable partitions being chattels to frustrate conditional break clauses. At present we are resisting drawing too many firm conclusions from this case and it will always be a question of fact and degree in every case.
As ever, tenants really need to consider the work they need to do to secure the effective break of their lease at a very early stage and make sure that they have taken out everything necessary (and anything they have any doubt about) before the break date. Damage caused by removal can be dealt with in a dilapidations claim but failing to remove may leave the tenant with a continuing lease liability.