Riverside Park Ltd v NHS Property Services Limited

A break clause requiring vacant possession must be complied with precisely. Vacant possession requires the property to be empty of people and chattels, and the person entitled to possession must be able to enjoy immediate and exclusive possession, occupation and control. Chattels left behind will prevent vacant possession where they substantially prevent or interfere with enjoyment of a substantial part of the property.

Whether an item is a chattel or fixture depends objectively on the degree and purpose of annexation. Demountable office partitions installed for the tenant’s own convenience may remain chattels. Contractual wording may also require unauthorised alterations to be removed automatically when the relevant licence ceases to have effect.

The claimant landlord granted a ten-year lease of office premises to Wirral Primary Care Trust. The lease contained a break clause requiring at least six months’ notice and vacant possession on the break date. The defendant subsequently became the tenant and sought to rely on the break.

Office partitions and other works remained in the premises when the defendant vacated. The claimant contended that the works were chattels which substantially interfered with possession, or alternatively that they were excluded tenant’s fixtures which the defendant was obliged to remove. The central issues were the status of the works, the meaning of vacant possession, and the effect of the Lease and Licence for Alterations.

1. The claim succeeded. The break clause required precise compliance. Since vacant possession had not been given on the break date, the notice was ineffective and the lease continued.
2. Vacant possession required immediate and exclusive possession, occupation and control. The relevant question was whether the physical condition of the premises substantially prevented or interfered with enjoyment of a substantial part of them. The fact that the landlord intended to relet rather than occupy the premises did not prevent its enjoyment from being compromised.
3. The partitions were chattels, not tenant’s fixtures. They were standard demountable partitions, attached only to non-structural parts by screw fixings, capable of removal without material damage, and installed principally for the tenant’s convenience rather than as a lasting improvement to the premises. The other works were also chattels on the facts, although their presence alone might not have prevented vacant possession.
4. The partitions substantially interfered with possession. Their unusual configuration created a series of small offices and materially affected the landlord’s ability to offer the premises in a condition it considered suitable for prospective tenants. The unreturned key fobs and alarm did not establish a continuing right of control.
5. Alternatively, if the works were fixtures or otherwise part of the demise, the defendant was still obliged to remove them. The Licence ceased to have effect because of material breaches of its covenants. Properly construed, clause 5.7 required reinstatement automatically when the Licence ceased to have effect, whereas clause 3.19.6 of the Lease applied where the landlord required removal. The two provisions were consistent.
6. The defendant was therefore liable to comply with its continuing obligations under the lease, including payment of rent and other sums due.