Riverside Park Ltd v NHS Property Services Ltd (2016)

The High Court was asked to consider whether a tenant had exercised its break clause effectively and given vacant possession of the premises.

Background

On 24th September 2008, Riverside Park Limited (Landlord) had granted a ten-year lease (Lease) of its first floor premises to Wirral Primary Care Trust (Wirral).

The Lease contained a break clause, giving the tenant the right to terminate the lease. However this was on the condition that no less than 6 months’ notice was given to the Landlord and that vacant possession was given on or before the break date, being 24th September 2013.

Both parties had also entered into a license for alterations (License) enabling Wirral to carry out works such as installing partitions, kitchen units and an alarm, provided that Wirral complied with certain conditions; these being they obtained the consent from insurers and works were conducted in accordance with certain plans and specifications.

In March 2013, Wirral exercised the break clause and the Lease became vested in NHS Property Services Ltd (Tenant).

The tenant had intended for the Lease to terminate on the break date, however the Landlord disagreed. The Landlord argued as the Tenant had not removed the works that had been installed, vacant possession had not been given, thusly rendering the break notice ineffective.

The Tenant argued that the work carried were fixtures thus they had no obligation to remove them; but also argued that even if the work was to be considered as chattels they had not substantially interfered or prevented the Landlord’s enjoyment of the property.

Deciding factors

In reaching its decision, the court considered:

  • Whether the works carried out formed fixtures or chattels.
  • If the works were be considered chattels, whether their presence had meant that vacant possession had not been given.
  • If considered as “fixtures” whether there was an obligation on the Tenant to remove them to give vacant possession.

Outcome

The court had concluded that given that the works were only ‘slightly attached’ and were demountable; they were chattels and the impediment the Landlord incurred by their presence meant that vacant possession had not been given.

Comment

Tenants beware! If the exercise of a break clause is dependent upon vacant possession, you may easily breach the clause if you leave items behind. As evidenced above, it can be difficult to determine whether an item is classed as a chattel or a fixture.

It is better to avoid entering leases with such conditions attached to the break clause. Alternatively, if you do so, it is vital to ensure that all terms within the lease and any licenses are carefully checked beforehand, so that you know what your obligations are.

 

The above does not constitute legal advice. For further information please contact Nath Solicitors.

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