Breaking bad!

Commercial leases often give the tenant a ‘break right’ to end the lease early on service of a written notice. The tenant’s right to break is often dependant on the tenant meeting various conditions set out in the lease, one of the most common being a requirement for the tenant to give ‘vacant possession’ at the break date. This can be a fertile ground for disputes as landlords look for reasons to challenge the validity of break notices, particularly where it may be difficult for them to find a new tenant at the same rent.

Landlords and tenants alike should be aware of a recent case in which the court had to decide whether a tenant’s failure to remove internal partitioning (erected with the landlord’s consent to create separate offices within the open-plan space), meant that vacant possession had not been given.

The case turned upon whether the partitions amounted to a ‘tenant’s fixture’, which the tenant was not required under the lease to remove. The court noted the demountable nature of the partitioning, which had been connected only to non-structural parts of the premises by screw-fixings and which it therefore viewed as temporary in nature, and decided that it was not a ‘fixture’. 

The question then became whether the existence of the partitions substantially prevented or interfered with the landlord’s ability to use and enjoy the premises. The court decided that they did, and therefore found that vacant possession had not been given and that the lease had not therefore been effectively broken. The tenant became liable for the rent for the remainder of the lease term.

The lesson for any tenant considering exercising a break right is to seek early advice about what needs to be done to ensure that the break is effective.  It may be possible to agree specific points with the landlord, such as whether partitions need to be removed, but, in the absence of clear agreement, a tenant should not take chances. To do so could risk having to pay rent for the remainder of the lease term - whether occupying the building or not!

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.