Break clauses have always been a tricky area for tenants – a recent case in the Court of Appeal has illustrated that fact.

In NYK Logistics -v- Ibrend Estates, NYK Logistics (the tenant) served their break notice – the condition of the break clause appeared simply enough – the tenant was required to deliver up vacant possession – so how could they get it wrong?

Well in this case the tenant spent time after serving the notice repairing and reinstating the premises to avoid a claim for dilapidations from Ibrend Estates (the landlord) after the lease ended.

The tenant however did not finished the works on time and on the break date workmen were still in the premises, the tenant’s site security was still in place and the keys were not returned to the landlord.

The tenant did try to negotiate an extension of time to finish the dilapidations works but this was never formally agreed by the landlord.

The Court of Appeal found that the tenant took no actions that were consistent with delivering up the premises with vacant possession. The test is :

• Was the person who was required to give vacant possession still actually using the property for his own purposes?
• Is the physical condition of the property in such a state that there is no substantial impediment to use of the property (or a substantial part of it) by the person taking the property? Physical impediments only become vacant possession issues in exceptional circumstances (this was not relevant in this case).

Commercial tenants should be aware that they cannot expect landlords to help them satisfy the pre-conditions of any break clause – this is why when negotiating a break clause in a lease the preconditions must be capable of completion by the tenant alone without relying on the landlord. The tenant must ensure that he complies with those conditions carefully and has evidence to show compliance. Unless the landlord agrees otherwise (in writing) the tenant must give back possession of the property and the keys by the break date.

For further help and assistance on dilapidation claims please contact Merwyn Emmanuel merwyn.emmanuel@ker.co.uk or for assistance on the drafting or a new commercial lease please contact Mark Sadler 01708 757575 or email mbs@ker.co.uk