Court of Appeal clarifies meaning of ‘vacant possession’ in break clauses

A vacant possession obligation in a property lease break clause only required the tenant to return premises to the landlord free of people, chattels and legal interests, and was not concerned with the physical condition of the premises, the Court of Appeal has ruled.

Overturning a decision of the High Court, the Court of Appeal said the fact that the tenant had stripped out various fixtures and fittings and therefore left the property in such a state that there was a "substantial impediment" to the landlord’s use did not mean that the tenant had failed to deliver ‘vacant possession’

As a result, according to the landlord, the former tenant was liable for rent even after it had moved out. In the High Court the judge found that landlord’s use of the property would be substantially impeded by the extensive nature and scope of the fit out works. The judge granted a declaration that the break was ineffective and the lease continued.


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