Break Notices - Going too far in providing vacant possession

The High Court recently gave judgment in Capitol Park Leeds plc v Global Radio Services [2020] in which it held that a tenant had failed, after serving a break notice to terminate the lease, to comply with a condition requiring it to provide “vacant possession”.

The term of the lease was to run from 12 November 2001 to 11 November 2025. However, the lease also contained a break option allowing the tenant (Global Radio) to terminate the lease early, on 12 November 2017. To take advantage of this break option, Global Radio needed to give the landlord at least 6 months’ notice and (amongst other conditions) had to give “vacant possession of the Premises to the Landlord on the … Break Date”.

Global Radio gave the landlord 6 months’ notice in February 2017 and set about trying to give “vacant possession” by 12 November 2017. This involved stripping out various features of the premises, including ceiling tiles, radiators, fire barriers and pipework.

However, further works ceased during negotiations between Global Radio and the landlord regarding a possible settlement of Global Radio’s liabilities under and a surrender of the lease. Ultimately the negotiations failed and Global Radio were left with insufficient time to complete the remaining works to the premises.

Global handed back the keys to the premises on 12 November 2017. However, the landlord argued that in returning the premises on 12 November 2017, minus those elements and/or fixtures which had been stripped out, Global Radio had not complied with the condition to give “vacant possession of the Premises”.

The unusual feature of this case, which the parties accepted had not been addressed in case law to date regarding “vacant possession”, was not necessarily that the tenant had not done enough (ie. they had failed to remove certain tenant items) but where a tenant has gone too far and may have left a property “empty but devoid of essential fixtures and fittings”.

In concluding its judgment, the court found that Global Radio did not give “vacant possession” as they handed to the landlord “considerably less than ‘the Premises’ as defined in the Lease”. The definition of “the Premises” in the lease included the words “all fixtures and fittings at the Premises whenever fixed (except Tenant’s fixtures)” and “all additions and improvements made to the Premises”. In the court’s view this definition ensured that where a tenant exercised the break option it could not do so “by handing back an empty shell of a building which was dysfunctional and unoccupiable”.

This case is a warning to tenants that it is important to consider in detail (and well in advance of a break date) what a condition to provide “vacant possession” requires. In some circumstances, it appears tenants can go too far in trying to satisfy such a condition.

Permission to appeal has been granted to Global Radio, so it will be interesting to see if the Court of Appeal reverses the High Court’s ruling.